Intel was once the undisputed king of the semiconductor industry, until the chip giant outpaced rivals Nvidia and Advanced Micro Devices in recent years. Now, with a new CEO, Intel is reclaiming some of its swagger.
Intel (INTC), whose stock fell more than 15% in 2020 and shook hard last year, is poised for a sustainable rebound despite concerns about global chip shortages.
The company is taking steps to address this issue, particularly by increasing production in the US. Intel on Friday announced plans to invest more than $20 billion on two new semiconductor plants in Ohio. President Biden will discuss the Intel news later on Friday.
Intel's shares are up 3% in 2022 while rivals Nvidia (NVDA) and AMD have each lost more than 10%. Intel is outperforming the rest of the chip industry. The iShares Semiconductor (SOXX) exchange-traded fund is down 8% so far this year.
Intel CEO Pat Gelsinger, who joined the company last year from software firm VMware (VMW), is also feeling confident. It could even be on the border, well... cocky.
Last week, Gelsinger posted a holiday/New Year's video message on LinkedIn to brag about her recent achievements. Wearing an ugly Christmas sweater emblazoned with Intel's logo, Gelsinger said the company's new Elder Lake chips for PCs have put Intel back in a win-win situation in the chip world.
"Suddenly, boom! We're back in the game," he chuckled. "AMD in the rear view mirrors ... and they'll never be in the windshield again, we're just leading the market!" He sang. Gelsinger spent 30 years at Intel, first as its Chief Technology Officer and later as Senior Vice President and General Manager, before leaving to take a job at EMC in 2009. (EMC has since merged with VMWare and is now owned by Dell (DELL).)
Intel Playing Catch Up To Nvidia And AMD
AMD, under CEO Lisa Su, has gained market share in PC chips over the past five years, primarily at the expense of Intel. That's one of the main reasons AMD's stock has risen more than 1,200% since January 2017. Meanwhile, Intel is up only 45%, while the iShares Semiconductor ETF is up 300%.
Nvidia's stock has also been a much better bet than Intel's during the past five years, so much so that Nvidia has a market valuation of about $635 billion, nearly three times Intel's $219 billion.
And Nvidia has been a leading player with AMD in graphics processing chips, a segment of the market that has grown rapidly for gaming and cryptocurrency mining. Intel is now trying to play catch-up in the graphics chip market, and analysts see some hopeful signs for the company's upcoming Arc family of processors.
Intel's weak performance, compared to AMD, Nvidia and the rest of the sector, is probably a major reason former CEO Bob Swan stepped in last year to make way for Gelsinger's return.
Intel has more momentum now. It recently appointed a new chief financial officer from memory chip giant Micron (MU), a move that has been applauded by tech investors.
Traders also liked the December announcement that Intel plans to eventually wind down self-driving tech unit Mobileye, which it bought in 2017 for $15 billion and is expected to go public with a valuation of about $50 billion. .
Wall Street analysts are also acknowledging a clear change in momentum in the sector. Piper Sandler's Harsh Kumar downgraded AMD's stock on Thursday, citing growth concerns and increasing competition in the chip sector.
And Susquehanna International Group analyst Chris Rowland wrote in a report Thursday that the Arc chips, which will be used primarily for PC gaming, could "heat up" competition with AMD and Nvidia.
"At the right price point," Rowland said, Intel may be able to quickly "gain share in an otherwise supply-constrained market."
Intel is likely to give investors an update on supply chain issues when it reports earnings for the fourth quarter on Wednesday.