The semiconductor industry behemoth, Nvidia (NVDA), has just given investors a new reason to take another look at the beaten-down chip giant Intel (INTC). Nvidia announced that it would buy $5 billion worth of Intel’s stock at a price of $23.28 a share.
At the news of its rival’s significant stake acquisition, Intel’s shares jumped nearly 23% on Sept. 18, taking the stock to a fresh 52-week high. Intel has been trying to regain its lost glory, as the company appears to have fallen behind the artificial intelligence (AI) boom, unlike other chip producers.
In fact, in August, President Trump announced that the U.S. government took a considerable 10% stake in Intel. The acquisition primarily comes from repurposed unawarded grant money awarded to Intel through the CHIPS and Science Act.
Do all these investments make Intel a buy now?
Intel, based in Santa Clara, California, is at the forefront of the semiconductor industry, specializing in microprocessors and chip technologies that power a wide range of devices, from personal computers to large-scale data centers.
In recent developments, the company has focused on expanding its manufacturing capabilities to address the rising global demand for advanced semiconductors. Intel has committed significant investments, including $20 billion for two new chip factories in Ohio, to strengthen its production infrastructure. However, the project has been delayed to 2031.
Additionally, the company is heavily concentrating on emerging fields such as AI, 5G, and autonomous technology, aiming to broaden its product offerings and lead the way in the next wave of technological innovations. The company has a market capitalization of $133.80 billion.
Over the past 52 weeks, INTC stock has gained 39.7%, while it is up 47.3% year-to-date (YTD). The stock reached a 52-week high of $32.38 on Sept. 18, while its shares gained 22.8% intraday on the news of the investment. It is now down 8.7% from this high.
The company’s stock is trading at a relatively cheap valuation. Its price-to-sales (P/S) ratio sits at 2.49 times, which is lower than the industry average of 3.65 times.
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On July 24, Intel reported its second-quarter results for fiscal 2025, which fell short of expectations to some extent. The company’s revenue was flat year-over-year (YoY) at $12.86 billion, which is higher than the $11.87 billion that Wall Street analysts had expected.
However, its non-GAAP gross margin declined from 38.7% in Q2 2024 to 29.7% in Q2 2025. The company cited approximately $800 million in non-cash impairment and accelerated depreciation charges related to excess tools with no identified reuse, as well as approximately $200 million in one-time costs that contributed to this decline in gross margin.
Intel has become a loss-making company. In the second quarter, the company reported an adjusted loss per share of $0.10. This was a significant turnaround from the $0.02 per share adjusted earnings it had reported in the prior year’s period. The figure also fell short of the consensus Wall Street analyst estimate of $0.01 EPS.
For the third quarter, Intel expects its revenue to be in the range of $12.60 billion to $13.60 billion, while its bottom line is likely to remain in the red, with an expected attributable GAAP loss per share of $0.24. The company’s non-GAAP gross margin for Q3 is expected to be 36%.
Wall Street analysts are still optimistic about Intel’s ability to reduce its bottom-line losses. They expect the company’s loss per share to narrow by 81% YoY to $0.12 for the third quarter. For the current fiscal year, the loss per share is projected to decrease by 52.9% annually to $0.40, followed by a 137.5% improvement to an EPS of $0.15 in the next fiscal year.
Wall Street analysts currently have a mixed view about INTC stock. Recently, analysts at Barclays maintained an “Equalweight” rating on the stock while raising the price target from $19 to $25. Barclays analysts cited the company’s integration of x86 with NVLink, which might expand its data center opportunities.
On the other hand, analysts at Citi downgraded the stock from “Neutral” to “Sell,” while raising the price target from $24 to $29. Citi analyst Christopher Danely does not expect much improvement in Intel after Nvidia’s investment. Conversely, analysts at Benchmark upgraded Intel’s stock to “Buy,” raising the price target to $43 and believing that the Nvidia investment could restore confidence in the stock.
Wall Street analysts are taking a cautious stance on Intel, with a consensus “Hold” rating overall. Of the 39 analysts rating the stock, one analyst gave a “Strong Buy” rating, while the majority, 33 analysts, are playing it safe with a “Hold” rating, and five analysts gave a “Strong Sell” rating. The consensus price target of $21.83 represents a 26% downside from current levels.
While Nvidia’s investment in developing CPUs is expected to be beneficial for Intel, it remains to be seen how the company utilizes this. Meanwhile, the company is facing mounting pressure from falling behind in the AI wave and declining profitability. Therefore, it might be wise to just observe INTC stock for now.
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On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
