Intel stock could gain 20-30% on these 'significant' catalysts - analyst

Investing.com -- According to a note from one research firm this week, Intel (NASDAQ:INTC) stock could be on the verge of a notable upswing, with the possibility of a 20% to 30% increase, thanks to what they describe as 'significant' catalysts.
Intel stock could surge says analyst

Lynx Equity Strategies told investors that on a tactical basis, they expect upward momentum in Intel’s stock, driven by the aforementioned catalysts.

“In an environment where investors are actively seeking out ideas in the AI space, even modestly positive catalysts could have an outsized impact on stock movement,” wrote the firm.

The first catalyst they see is Intel’s April 2nd event, where it is planning on rolling out its new reportable segments.

“Such an event, usually a dull affair, could have a little bit of an oomph this time,” stated Lynx Equity. “We expect the event to feature rationalization of business groups and to offer details of the CHIPs act monies.”

Furthermore, they expect the company to report reconfiguration of business groups resulting in, “hopefully, more clarity.”

Now that the CHIPs act monies have been settled, Lynx Equity expects Intel’s CFO to provide specifics on the scope and timing of these funds and the degree to which these monies help with the ‘smart capital’ initiative, and “hopefully a bump to FCF outlook.”

The second catalyst is the launch/ramp of Sierra Forest sometime in the first half of 2024.

“The launch has not garnered much enthusiasm among investors as management has not attached a recognizable theme to this ~300core server chip,” wrote the firm. “After all Bergamo, a similar chip out of AMD (NASDAQ:AMD), has not had much traction.”

They think there is an AI angle to Sierra Forest at Meta), but not for Gen AI workloads ”that investors conflate with everything AI-related.”

They added: “Furthermore, we think there is a possibility that Sierra Forest could start shipping in early 2Q.”

Can Intel become a major AI beneficiary

There are indications that Intel's strategic initiatives in the AI space and recent funding awards position the company to become a significant player in the AI market, potentially reaping the benefits of the accelerating adoption of AI technologies.

Analysts at BofA Securities said in a recent note that they hosted Intel CFO David Zinsner and investor relations head John Pitzer for a well-attended investor dinner in Santa Clara on Tuesday.

According to the firm, management highlighted the company’s enterprise AI opportunity leveraging INTC’s strong incumbency, as well as the coming PC recovery led by AI-PC and Win10 expiration-driven enterprise upgrades.

However, Needham&Company analysts recently downgraded Intel shares to Hold from Buy, citing several concerns impacting the company's performance.

The firm said management's optimistic PC TAM estimates are viewed as “aggressive,” and the potential AI PC upgrade cycle may take time to materialize. Intel’s valuation is also considered unattractive compared to higher-growth AI-focused companies.

Furthermore, last year, when a report by a major Korean media outlet stated Naver, the Google (NASDAQ:GOOGL) of Korea, has recently announced it has finally found a way to replace the Nvidia (NASDAQ:NVDA) H100 with Intel Sapphire Rapids and AI accelerators, Bernstein analysts stated the move is not a game changer yet.

"By far, H100 of NVIDIA is the best performing AI chip in the world, ~1.5x-4.5x better than their previous generation (A100) on inference, and better on available inference tests against accelerators from Google, Qualcomm (NASDAQ:QCOM), HabanaLabs," said the Wall Street firm. "We still believe Switching GPU to CPU is not an ideal option because it is super costly for AI tasks, especially LLM model training.”