President Biden promotes US chip stocks.
Intel shares set higher lows.
The stock appears to be on the verge of a technical breakout.
5 Stocks We Like More Than Advanced Micro Devices
Intel Corporation (NASDAQ: INTC ) ended the year with a ton of baggage and a depressed stock price. Shares have surrendered more than 60% in less than two years, and the chip giant has been under increasing pressure from investors to get it together.
However, it looks like stocks have managed to drop to the bottom as the bears seem to have run out of steam, at least for now. Let’s take a look at what tailwinds could support the view that stocks could break out soon.
For starters, Intel is splitting its graphics chip unit into two to better compete with other big chip names like NVIDIA Corporation (NASDAQ: NVDA ) and Advanced Micro Devices, Inc. (NASDAQ: AMD), which together lead the AI chip industry. For the most part, Wall Street was pleased with the move by management, which has come under fire in the past for seemingly doing nothing to stem the loss of market share.
Raja Koduri, who heads the graphics chip unit at Intel, made the decision. He previously led graphics technology projects at Apple (NASDAQ: AAPL ), and right now he feels like a much-needed safe pair of hands to help spark a comeback.
On the rebound, Bitcoin’s 30% rally this year sent shares of HIVE Blockchain Technologies Ltd (NASDAQ: HIVE ) jumping nearly 150%. If you’re wondering what this has to do with Intel, stay tuned and keep in mind that Intel chips power HIVE miners.
The primary domino effect of a comeback bitcoin, and crypto in general, is the increased profitability of mining, which increases the demand for the chips that power it. If some of Intel’s weakness last year can be attributed to the crypto selloff, then the continued reversal should also be a drag on Intel in the coming months.
Additionally, the state of the U.S. chip industry has caught the attention of President Biden, who is set to further promote U.S. semiconductor companies at a series of upcoming summits with Canadian and Mexican world leaders.
Biden hopes supply chain disruptions in China and other parts of Asia will lead to outside investment in domestic chip equipment. The goal is to encourage world leaders to coordinate supply chain operations in the U.S. so they no longer have to rely on facilities in Asia to provide needed products.
A bearish headwind
So while there are fundamental reasons to be bullish on Intel, there are risks to note. The Bank of America team recently lowered their PC estimates for the first half of 2023, based on some industry reviews.
Additionally, analyst Vivek Arya reiterated his Underperform rating on the stock and cut his 2023 EPS estimates by 9%. That was primarily based on the company’s soft guidance, adding in a note to clients that “there are additional concerns that Intel is pricing its products more aggressively to capture share and take advantage of incremental capacity.”
For investors looking for higher-quality names in the space, they don’t have to look much further than the aforementioned AMD, whose in stock Arya rated as Buy.
But with a price-to-earnings ratio of just 9 versus AMD’s 41, investors will feel like they’re getting a bargain with Intel for what it is. And with the December low failing to break below the October lows, we now see a bullish situation technically developing to support the uptrend.
Intel may have spent the last three years with the bears, but it looks like the bulls are ready to make a comeback. If the stock can get above $30 and hold that line, it is well-positioned to benefit from additional industry-wide headwinds and company-specific initiatives.