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Chip Progress, AI Gains Leave Intel Stock Poised to Outperform


I remain convinced that Intel’s (NASDAQ:INTC) increased parity with AMD (NASDAQ:AMD) when it comes to computer chips, along with Intel’s superiority in the vital field of AI, leave Intel stock poised to outperform the market and AMD stock over the longer term, Meanwhile,Intel is looking to exploit all of the major, rapidly growing trends in technology, and it’s spending enough on R&D to do so effectively.

More Indications That Intel Is Catching Up With AMD on Performance and Price

Intel will cut its per-core price for its Cascade Lake chips for servers, ExtremeTech reported on Feb. 26. The price reduction increases the value of Intel’s chips and represents “part of Intel’s overall response” to AMD’s server chips, the publication stated. Meanwhile, on the desktop chip front, Intel is cutting its prices and introducing hyperthreading to all of its new chips.  According to the tech website Engadget, Intel’s new desktop chips ” should be competitive with AMD’s Ryzen 9 chips both in terms of performance and price,” The publication added, however, that Intel’s new desktop chips are “likely to be much more power hungry (than AMD’s offerings).” And the website noted that AMD will release new chips “as  early as Q3.”

Although I’m far from an expert on desktop computer chips or desktop computers, I find it hard to believe that power consumption would be a huge consideration for most buyers.  Given the low price of electricity in most areas and chips’ relatively low power consumption, I think chips’ performance and selling price are likely much more important considerations.  Further, as I discussed in my previous column on Intel, the company’s brand strength with end users and its ability to partner with PC makers are major advantages for it over AMD. As a result, I think that, as long as Intel’s products are in the general ballpark with AMD when it comes to cost and performance, the larger company will be able to at least avoid losing further market share to AMD.

Intel Is Making More Progress on AI and Its Strategy Looks Compelling

As I noted in my previous column on Intel, the company’s chips are proving to be popular with AI developers, and it expects its upcoming Cooper chips to “enable AI systems to be trained up to 60% faster than their predecessors.” Moreover, as I wrote in a previous article on AMD,

According to Analytics India Magazine, AI chips made by Habana are four times better than graphics processing units (GPUs)for supporting AI. The website quoted experts as saying that Habana’s chips have superior memory to GPUs, and that a great deal of memory is needed for AI.

In the latter article, I also noted that Analytics India had reported that Habana’s AI chips had been great and were “only second to Nvidia (NASDAQ:NVDA) in some categories.” Now it appears that Intel may be about to overtake Nvidia as well. Specifically, Intel, in collaboration with Rice University, has reportedly been able to radically increase the speed of Intel’s Xeon chips which are used for AI training. As a result, Xeon is now “3.5 times faster than Nvidia’s Tesla (chips) in AI deep learning,” according to wccftech.

Importantly, a recent article in Forbes written by an author who had interviewed Intel CEO Bob Swan shows that Swan is think about and taking action based on “the big picture.” Specifically, he is ensuring that the company is exploiting the main, huge trends in technology, including the Internet of Things, 5G, and, of course, AI. He repeatedly emphasized the importance of AI and said it’s “built into” the company’s “design thinking and implementation” the Forbes columnist stated.  Further, Swan is looking to help all of its customers digitalize, and the company spends more than $13 billion per year on R&D.  AMD spent $1.547 billion on R&D last year.

The Bottom Line on Intel Stock

More signs have emerged that Intel is catching up with AMD when it comes to the price and performance of its server and desktop chips. Meanwhile, Intel looks poised to become the leader when it comes to AI chips. As a result, Intel stock,  trading with a trailing price-earnings ratio of 12, looks ridiculously cheap. Long-term investors should  buy the shares at this level.

As of this writing, Larry Ramer did not own shares of any of the aforementioned companies. Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

Article printed from InvestorPlace Media, https://investorplace.com/2020/03/intel-stock-is-poised-to-outperform-on-chip-progress-and-ai-gains/.

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