Intel (NASDAQ:INTC) is benefiting from strong demand for its chips that are used to produce AI. Moreover, the company is positioning itself to get a lift from AI PC proliferation with its improved server chips. Long term, Intel stock should get a boost to its top and bottom lines from chip making for other companies. Additionally, a recent positive quarterly report from another major company in the chip space bodes very well for Intel. These points, combined with the attractive valuation of Intel stock, I recommend that all investors buy the shares.
Strong Demand for AI Chips, New Offerings Are on the Way
Intel CEO Pat Gelsinger reported last year that the demand for the company’s Gaudi chips, which are used to create AI, had doubled in just 90 days. Also noteworthy is that Intel reportedly cannot make the Gaudi chips quickly enough to meet the demand for them. Meanwhile, the demand for these semiconductors in China is “massive,” according to The South China Morning Post.
Moreover, a number of reviewers have reported that Intel’s Gaudi 2 chips, which it is now marketing, are competitive with Nvidia’s (NASDAQ:NVDA) top AI chip, the H100, in multiple categories.
Meanwhile, Intel recently released new, advanced AI chips for laptops and desktops. These semiconductors will allow PCs to provide AI directly to consumers, rather than relying on data centers for all of the AI muscle. In addition to enabling users to utilize AI for many more purposes and increasing the speed at which they can employ the technology, this change will greatly ease the strain put on data centers from providing gigantic amounts of AI to users.
Additionally, Intel has reported new server chips that deliver 21% average performance gain for overall computer performance over previous offerings. Meanwhile, the new chips also enabled 36% higher average performance per watt across a range of customer workloads.
A Strong Manufacturing Business and Positive News From a Competitor
Intel is preparing to build chips for other companies, and that business appears to be off to a strong start. As of October, the firm noted that it had already recruited three customers for the nascent unit, while a number of other firms had agreed to purchase Intel’s chip packaging.
Given the fact that Taiwan Semiconductor (NYSE:TSM) is currently the world’s only other major firm that builds chips for other companies, Intel’s semiconductor-manufacturing business can become very huge indeed.
Speaking of TSM, the company recently reported stronger-than-expected Q4 earnings per share and predicted that its sales would surge 20%-25% in 2024, with strong demand for AI chips powering the gains. Given Intel’s high exposure to AI chips, TSM’s 2024 revenue guidance is quite positive for Intel stock.
Valuation and the Bottom Line on Intel Stock
The forward price-earnings ratio of INTC stock is 25.8, That’s a very low valuation given the firm’s powerful growth outlook.
The strong demand for Intel’s AI chips, along with its chip-manufacturing business certainly make INTC stock worth buying.
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.
