We recently published a list of 10 AI Stocks Wall Street is Talking About. In this article, we are going to take a look at where Intel Corp (NASDAQ:INTC) stands against other AI stocks Wall Street is talking about.
Defiance ETFs CEO and CIO Sylvia Jablonski said in a recent program on Bloomberg that there are trillions of dollars of cash waiting on the sidelines ready to be invested in AI amid demand that is at an all-time high.
“There’s a biggest wealth transfer of our generation happening as we speak. And you know, Gen Z, you know, Gen Z, Millennial, Gen X kind of, you know, the younger traders are, this is where they’re allocating their funds to. And, you know, retail has definitely spoken, and institutions have definitely spoken, and they’re looking for that, that fourth industrial revolution allocation.”
Sylvia also talked about the relationship between quantum computing and AI and explained how this technology would improve AI systems:
“So chatbot AI is, you know, kind of version one. Quantum is taking everything to the next level. So you need quantum in order for it to be efficient. You need to process that data quickly. It will help, you know, essentially health care, cryptography, aerospace and defense, you know, blockchain technology. Anything you can think of will be better, too, with quantum supercomputing power.”
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For this article, we chose 10 AI stocks that are currently buzzing on the back of latest news and analyst ratings. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Intel Corp (NASDAQ:INTC)
Number of Hedge Fund Investors: 68
Chris Grisanti, MAI Capital Management chief marketing strategist, said while talking to CNBC in a recent program that it’s becoming difficult for Intel to gain back its dominance in the industry. The analyst explained Intel Corp (NASDAQ:INTC) problems using an analogy of ICE to EV transition.
“We’ve done a lot of work on it, and we just think the transition from the CPU—Intel’s bread and butter—to the GPU, the graphics processor, which is Nvidia’s bread and butter, is profound. It’s almost like going from the internal combustion engine to the electric car. I don’t think it’s realistic to expect the companies that led the internal combustion revolution to lead the next revolution. That’s what’s happening with Intel Corp (NASDAQ:INTC). We just didn’t see in our research a way for them to reclaim the ascendance they had lost, and I think that’s becoming further and further in the rearview mirror.”
Intel’s (NASDAQ:INTC) challenges are far from over. Revenue saw a slight improvement in Q3 2024, but other aspects appear set to worsen over the next 12 to 24 months. Investors should be mindful that in 2025, Intel Corp (NASDAQ:INTC) is expected to generate $4–$5 billion in operating cash flow against a projected $20–$23 billion in capital expenditures. Intel reported $5.1 billion in operating cash flow and spent $18.1 billion in the first nine months of this year.
Intel bulls are linking their hopes with Intel Corp (NASDAQ:INTC)’s foundry business. But the segment posted weak results in both the second and third quarters, with a third-quarter revenue drop of 8% and an EBIT loss that grew to $5.8 billion. Once seen as a potential competitor to Taiwan Semiconductor Manufacturing (TSM), Intel’s steep third-quarter decline raised serious doubts about its manufacturing competitiveness.
Despite short-term efforts to revive growth, Intel Corp (NASDAQ:INTC) is facing a harsh reality. It lags significantly behind its competitors in developing mobile CPUs and GPUs. Intel’s missed opportunities in the mobile sector and delayed entry into AI GPUs have further eroded its market position, causing it to lose substantial ground to rivals.
ClearBridge Large Cap Value Strategy stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter:
“While the market environment clearly was a headwind in the third quarter, several of our large positions also faced challenging conditions, which negatively impacted results. In the information technology (IT) sector, Intel Corporation (NASDAQ:INTC) has come under additional pressure due to continued softness in the company’s core PC and server markets as well as concerns on the company’s longer-term competitive position. While Intel’s turnaround is not happening overnight, we are constructive on the outlook into 2025: the company’s product positioning should be much improved and it should be positioned to gain market share in a cyclical upswing in which it has strong earnings power. A somewhat adverse spending environment due to AI myopia has weighed on shares, but we still think the market is undershipping PCs and general servers following a COVID normalization period that saw demand get pulled ahead and then languish as companies froze IT budgets. The installed base is now getting older, and we expect a strong refresh cycle into next year. The delay is actually beneficial to Intel, whose product positioning will be all the more improved. While our investment case is not predicated on an M&A transaction, and we believe one is unlikely, the expression of interest in the company speaks to the value of the assets, which we think still trade at a meaningful discount to fair value.”
Overall, INTC ranks 8th on our list of AI stocks Wall Street is talking about. While we acknowledge the potential of INTC, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than INTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.