Among the most beat-up semiconductor stocks, Intel Corporation (NASDAQ:INTC) is the most disliked one. INTC stock trades at a price-to-earnings and a price-to-sales multiple that value investors will think are too good. By comparison, Intel’s peers, which include Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA), are relatively more expensive.
Intel trades at a multi-year discount for a good reason. Since AMD rebuilt its desktop processor architecture, Intel lost its way. After each successive release from AMD, Intel failed to catch up. Late last year, Intel launched the Alder Lake CPU. This platform supports DDR5, a faster memory architecture. It also supports faster PCIe lanes, giving consumers better performance.
Nasdaq’s steep correction scared Intel investors. At these valuations, Intel could rise sharply from here.
| Ticker | Company | Price |
| INTC | Intel Corporation | $38.14 |
Huge Positive Catalyst
Originally set for an early 2021 release, Intel delayed the launch of Arc. The company needed a custom graphics card architecture to widen its addressable market. This schedule miss sparked aggressive stock selling.
On Jun. 19, Intel officially listed Arc A380 in China for $595, or 3,999 RMB. Intel Arc will have to overclock at speeds of up to 2,450 MHz. The TDP, or energy needed to run the GPU, is only 92 watts.
Intel is playing it safe with this soft launch. China is not a big GPU market for Intel. Instead of taking a risk with a North American launch, it will fine-tune its marketing and pricing in China. More importantly, the chip giant will get feedback from critical customers. It will work out bugs, if any, in the device driver software.
Intel could quickly grow its market share in the U.S. in the coming year. With positive reviews, highly satisfied customers will market Intel Arc on the company’s behalf.
Production Capacity Growth Delay
To hedge against the risk of China invading Taiwan, Intel is smartly widening its manufacturing geography. It planned to build a large chip factory outside of Columbus, Ohio.
Intel said that delays in passing the CHIPS Act would also delay Intel’s factory building plans. In January, Intel said it would spend up to $100 billion to build the plant. It committed to a starting investment of $20 billion.
Intel must get funding approved by Congress. It cannot move forward with its project plan without taking more risks. For example, supply chain disruptions are directly increasing inflation rates. Consumers have lower disposable income, hurting computer chip demand. The Central Bank raised rates to fight inflation, which could lead to a recession. This hurts the sales of PCs. Intel cannot increase demand risks without government support that lowers its costs.
Why INTC Stock Is a Buy
Intel has a superior PC chip architecture. For now, Intel may leverage its advancements by selling as many units of Alder Lake as possible before the downturn.
To broaden its product portfolio, Intel Arc opens up a new market. Intel has the budget to advertise and promote an alternative to Nvidia and AMD graphics cards.
The GPU market still enjoys strong pricing power. Intel needs to capture the market while gamers continue to spend on their upgrades.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
