Intel (INTC) looked doomed a year ago. The company lost its edge in the CPU market and missed out almost entirely in the AI race. All the products it launched did not yield tangible results, and the new CEO started off by laying off tens of thousands of workers. These layoffs did not have any immediate results, and the market grew impatient.
Most analysts tagged INTC stock a hold, including me. This business was going nowhere… Until the new CEO, Lip-Bu Tan, managed to charm President Donald Trump. There were rumors of a potential government investment in Intel, after which I changed my mind.
I wrote, “The risk-reward ratio is now heavily in your favor, and I see tremendous upside if this investment does materialize, as it did with companies like MP Materials (MP) earlier this year.”
That was over a month ago, and the government ended up making that investment. Unexpectedly, INTC stock did not surge as much, but it is now doing so after a surprise investment by Nvidia (NVDA) of $5 billion.
I believe INTC stock is now set to double.
What lies ahead for Intel
Intel now not only has the support of the U.S. government, but also the support of the biggest company. This deal will allow Intel to cooperate with Nvidia to develop data center and AI PC products. Intel will also manufacture custom CPUs with its x86 architecture for Nvidia to incorporate into its AI servers. This will power applications like ChatGPT, and I expect the deal to expand.
Nvidia CEO Jensen Huang described the partnership as a “historic collaboration,” stating that “AI is powering a new industrial revolution and reinventing every layer of the computing stack”. The collaboration will “tightly couple Nvidia’s AI and accelerated computing stack with Intel’s central processing units (CPUs) and its x86 ecosystem”.
Nvidia seems to be taking an “the enemy of my enemy is my friend” approach to check AMD (AMD).
Intel posted a $2.92 billion net loss in Q2, along with $21.2 billion in cash and $50.76 billion in debt. If these investments accelerate or more companies join in (which I believe will happen), Intel can bounce back rapidly. Investments will indirectly help the balance sheet and boost growth, likely to the double digits.
Where I see INTC stock next
Analysts already expect 455.4% EPS growth in 2026, along with a return to growth. A smooth execution of these signed deals will allow Intel to trounce its guidance.
INTC stock is up 66.4% from its 3-month low. I see it $60-70 within a year due to rapid investments pouring in, plus interest rate cuts. As mentioned previously, Intel has well over $50 billion in debt, and reduced debt servicing will be another major boost.
— Omor IE
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Source: Money Morning