Up until a few months ago, powerhouse chipmaker Intel Corporation (NASDAQ:INTC) badly lagged the competition. For instance, in 2016, the INTC stock price only gained 10.5%. Even against that year’s closing low, shares only returned 33%. In contrast, just picking up units of the sector benchmark Technology Select Sector SPDR Fund (NYSEARCA:XLK) would have profited 17%.
The comparison becomes more absurd when you include individual names.
Nvidia Corporation (NASDAQ:NVDA) hauled in a stunning 234% in 2016. Chief rival Advanced Micro Devices, Inc. (NASDAQ:AMD) shocked most everyone with a 309% return.
Last year was the year of the semiconductor, thanks to the fact that the industry’s boom-bust cycle entered into the boom end of things. Unfortunately, INTC stock had nothing to show for it.
To their credit, the Nvidia and AMD rallies weren’t just built on speculative fervor. Nvidia has been making a strong push into the industries of tomorrow, such as driverless-vehicle technologies.
AMD was busy pumping out world-class graphics cards that rivaled anything on the market; it also significantly helped matters that pricing was very reasonable.
Of course, who can forget about Bitcoin and the cryptocurrency complex’s meteoric rise? Both AMD and Nvidia launched specialty GPUs designed for crypto-mining. At least for Nvidia, it’s putting out a semblance of a correlation with Bitcoin prices.
During most of this time, Intel news was fairly barren. As a result, investors rode momentum in the hot semiconductors and largely ignored Intel. I think it’s quite telling that up until Sept. 12, the INTC stock price was at parity for the year.
How quickly things change.
Over the trailing three months, INTC stock is up 26%, which is also roughly its year-to-date return. But can this sharp boost last?
INTC Is Making up for Lost Time
Based on a number of factors, sentiment towards the INTC stock price is very much credible. First, the most substantive piece of recent Intel news is its stronger-than-expected third-quarter-earnings results.
The company raked in $1.01 per share in profit, well ahead of Wall Street’s consensus 80 cents per share target.
Revenues of $16.15 billion also came in higher than expected against a $15.73 billion consensus estimate. Much of the outperformance came from Intel’s artificial intelligence and cloud infrastructure businesses, which are significant sources of future growth. Additionally, the chip maker’s data center hauled in $4.88 billion, or nearly 2% above forecast.
Another catalyst for a still-rising INTC stock price is Intel’s latest Coffee Lake gaming processor. As I’ve mentioned several times, gaming is serious business no matter what you think of the underlying subculture. And in this arena, AMD has been making strides, culminating in their latest Ryzen processor.
But as InvestorPlace feature writer James Brumley explains, Coffee Lake could spark a paradigm shift. He writes:
“The new Coffee Lake (just a code name, by the way) CPU lineup’s top performer is a six-core beast capable of sustained operating speeds of 3.7 gigahertz, and turbo-boosted peak speeds of 4.7 gigahertz, which is more than enough to handle any video games on the market today. And, with a sticker price of only $380 (or less, for lesser versions) would-be Ryzen buyers now have a choice to make.”
I believe that for most buyers, the choice will be a no-brainer. AMD has frequently struggled with the “poor man’s Intel” image. Professional brand rankings, which consistently place Intel above AMD, do no favors in overturning that image.
If Intel can produce a superior chip for a similar price range, AMD doesn’t have great counterattacks available.
Believe in the INTC Stock Rally
From an investor’s perspective, the choice becomes more clear. As InvestorPlace contributor Ian Bezek notes, INTC stock is an underrated dividend play. While other companies offer more than its 2.7% yield, INTC “has plenty of earnings muscle to keep growing its dividend.”
Moreover, Bezek brings up another great point: Intel spends $13 billion a year on research and development. This gives INTC considerable leverage, especially as it plays catch-up in the semiconductor market.
Ultimately, the biggest piece of Intel news is that the alpha wolves are back to reclaim their territory. In recent years, INTC stock hasn’t looked convincing. That changed over the past three months, which spells trouble for Intel’s lesser-able competitors.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
