The past two years have been great for semiconductor stocks. Well, most semiconductor stocks, they are. Since OpenAI introduced ChatGPT to the world on November 30, 2022, shares have soared Nvidia and Advanced micro devices They increased by 721% and 83%, respectively. By contrast, peer-chip stocks Intel (Nasdaq: INTC) It decreased by 25% during this period.
There’s no doubt that Intel has faced a number of challenges over the past couple of years as its groups have quickly overtaken it in the AI revolution. However, after taking a closer look at Intel’s price action, there may be some reasons to believe that the stock is positioned for a rebound.
Start your morning smarter! Wake up with Breakfast news In your inbox every market day. Register for free »
Below, I’ll explore something Intel stock hasn’t done since 2022 and explain why I’m cautiously optimistic that better days may lie ahead for the chipmaker.
The chart below shows Intel Price to sales (P/S) ratio during the past three years. The first thing I noticed was that it bottomed at around the 1.5 level sometime between August and September. The last time Intel’s P/E ratio reached this level was in 2022 – and coincidentally, in around the same months of 2022 as well.
What I also noticed is that Intel stock started to rise after the ratio bottomed at 1.5 in late 2022. Furthermore, Intel stock continued to rise throughout 2023 – only to return to its lows through most of this year.
on the surface, Investors may think Intel stock has hit bottom And stocks are destined to repeat the upward movements we saw in 2023. However, smart investors realize that history is no indication of future performance. One has to look for actual catalysts – and I see several potential catalysts right now that could help the stock rebound.
As I noted above, Intel’s P/E ratio bottomed out somewhere in August and September 2022 and then continued to rise for ages. Do you know what else happened during this time period? President Biden signed the CHIPS and Science Act into law on August 9, 2022. And do you know what company was the main beneficiary of the CHIPS Act? It’s Intel.
Over the past two years, Intel has received tens of billions of dollars in grants and loans as part of CHIPS Act funding. While this sounds great on the surface, there are some caveats. That is, companies rarely receive federal funding the moment the award or grant is announced. In other words, it may take a long time to actually receive this funding. Furthermore, sometimes the original dollar amount awarded can change.
The unfortunate truth is that it took a while for Intel to start receiving some of this funding, some of it coming in slightly smaller dollar amounts than initially expected. In my view, Intel’s stock rally in 2023 has been driven by a combination of broader euphoria surrounding artificial intelligence (AI) coupled with optimism that the CHIPS Act will benefit the company.
Even though the reality is all the way back to 2024, I still see several reasons for Intel stock to come back. First, President-elect Trump campaigned on a promise to bring manufacturing jobs back to America from abroad. Furthermore, it’s no secret that AI-powered chips are a hot commodity and require increased scrutiny when it comes to the defense sector and the US military.
Furthermore, Intel CEO Pat Gelsinger recently announced his retirement. Since Gelsinger took over as Intel CEO in February 2021, the stock has generated a total return of negative 53%. With a track record like that, it’s time for a change. I think new leadership with new management focused on domestic manufacturing and US business could bode well for Intel.
Honestly, I’m confused about investing in Intel. While the stock appears to be rebounding ever so slightly from the low point of the P/E multiple, I can’t quite buy into the idea that the company will turn things around.
Although I remain optimistic about its potential, I need more concrete evidence that Intel is indeed moving forward. Ultimately, the financing of the CHIPS Act, the possibility of a new administration investing in America, and plans to appoint a new CEO are very ambiguous.
At best, I see Intel as a speculative buy right now. But with all this said, I’ll definitely be keeping an eye on the company, as 2025 could be the start of another run for the chipmaker.
Before you buy shares in Intel, consider the following:
the Motley Fool stock advisor The analyst team has just defined what they think it is Top 10 stocks Investors are buying it now… and Intel wasn’t one of them. The 10 stocks that made this cut could deliver massive returns in the coming years.
Think when Nvidia I prepared this list on April 15, 2005… If you invested $1,000 at the time of our recommendation, You will have $889,433!*
Stock advisor It provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. the Stock advisor The service has More than four times The return of the S&P 500 since 2002*.
*Stock Advisor returns as of December 2, 2024
Adam Spatacco He has positions at Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends the following options: Short February 2025 $27 calls on Intel. The Motley Fool has Disclosure policy.
Intel shares did something they haven’t done since 2022 Originally published by The Motley Fool