Intel’s (NASDAQ:INTC) fourth-quarter results show that the chip maker is growing rapidly, benefiting from multiple, strong trends, and becoming much more profitable. The chip maker’s weaker-than-expected Q1 guidance made investors very wary about the outlook of INTC stock. But the miss was not caused by any problems with the company’s core business.

Contrary to the assertions of many of those who are bearish on INTC, the firm is indeed benefiting significantly from selling AI chips, and that trend should intensify a great deal as the year progresses. Also importantly, Intel continues to be very well-positioned to get a big boost over the long term from making chips for other companies. And finally, the valuation of INTC stock continues to be very attractive. Given these points, I remain very bullish on Intel and recommend that investors buy the shares.

Strong Q4 Results and Overdone Worries About the Company’s Guidance

As I noted in a previous column, the chip maker’s “top line climbed 10% year-over-year to $15.4 billion. while its earnings per share (rose) to 63 cents, way better than the loss per share of 16 cents that the (company) generated in Q4 of 2022.”

Clearly, Intel has made significant progress when it comes to selling more of its chips and cutting its costs. Intel is also benefiting a great deal from the beginning stages of a rebound of PC sales. Indeed, the revenue of the company’s unit which sells chips for PCs jumped 33% versus the same period a year earlier. And, as we’ll see, the firm is getting a meaningful lift from the popularity of its Gaudi chips which are used to create AI.

The lower-than-expected Q1 guidance was triggered by “a combination of seasonality, conservatism by the company, its decision to sell off a number of its businesses last year, and (the) poor performance by its peripheral FPGA business. “

Actually, the guidance may not tell us much about how the firm’s business will actually perform this quarter. That’s because the firm usually beats analysts’ average estimates by huge amounts, indicating that its guidance tends to be very conservative. Indeed, “in all…the last three quarters” for which INTC has reported financial results, it has beat analysts’ mean outlooks by “73.68%, 833.33%, and 40.74%.”

A Meaningful AI Boost That Will Greatly Intensify

Intel’s backlog of orders for its Gaudi chips “grew (by a) double digits (percentage) sequentially in Q4 and is now well above $2 billion and growing,” CEO Pat Gelsinger noted on the firm’s Q4 earnings call. Moreover, the CEO expects the growth of the revenue generated by the chip to accelerate “throughout the year.”

In July, the backlog of orders for the Gaudi chips was only “over $1 billion.”

That means that the backlog of the chips likely increased by at least 50% between July and December. Given these points, along with Gelsinger’s statement that Intel is increasing production of the chips to meet demand, I expect the product to generate revenue of more than $1 billion for the firm in Q4 of 2024. Intel’s overall top line came in at $15.4 billion last quarter, so the Gaudi processors should be a meaningful needle mover for INTC stock by Q4.

Moreover, the AI boom and the increased popularity of Edge AI should significantly boost the demand for Intel’s new Core Ultra chip. According to Gelsinger, “the Core Ultra is the most AI-capable and power-efficient client processor with dedicated (AI creation) capabilities.” He added that “Core Ultra (is) ushering in the AI PC era.”

Meanwhile, about one-third of the demand for the company’s server chips since early last year has been driven by the AI boom. And its new server chips, which are becoming available now, boost the “performance” of AI systems by “up to 42%,” Gelsinger reported. Consequently, I expect INTC’s server chips to generate even more revenue for the firm going forward.

Intel Is on Track to Become the World’s Second Major Chip Manufacturer

Currently, Taiwan Semiconductor (NYSE:TSM) is the world’s only huge chip manufacturer. But Intel is on track to make that monopoly a duopoly.

Gelsinger has stated that four companies have committed to having their chips manufactured by Intel. And INTC — with significant financial help from multiple governments, including those of the U.S., Germany, and Israel – is building several factories that will enable its manufacturing business to really take off starting in 2025.

Valuation and the Bottom Line on INTC Stock

Intel’s forward price-earnings ratio of 31 continues to greatly undervalue the firm’s huge opportunities in AI chips and manufacturing. As a result, I believe that the shares are a great buy for long-term investors.

On the date of publication, Larry Ramer held a long position in INTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.