Intel Rises 7.9% in the Past Year: Should You Buy the Stock?

Intel Corporation INTC has increased 7.9% over the past year compared with the industry’s growth of 48%. It has underperformed compared to the Zacks Computer & Technology sector and the S&P 500.

The company has also underperformed its competitors like Advanced Micro Devices AMD but outperformed Qualcomm Incorporated QCOM. AMD has surged 31.2%, while Qualcomm has decreased 7.3% during this period.

INTC’s Key Growth Drivers

Intel’s client computing group is benefiting from solid demand for AI PCs. AI PCs support seamless AI native software integration, optimize performance of AI native applications leveraging superior central processing unit, graphics processing unit and the new neural processing unit capabilities. Moreover, AI PC’s on-device AI processing support a wide range of cutting-edge tools, simplifying workflow and boosting efficiency. Hence, organizations across industries are rushing to incorporate AI PCs across their operations to drive productivity and support highly demanding workloads. 

With the leading-edge AI chips offering, like Intel Core Ultra processors, Intel is well positioned to gain from this AI PC boom. The company aims to ship 100 million AI PCs powered by its chips in 2025. Intel is witnessing strong momentum in the Asia-Pacific region, where collaboration with leading manufacturers such as Lenovo, ASUS and Huawei is driving growth. 

Growing market traction of XEON 6 processors is a major growth driver in the Data Center and AI Group. The company recently introduced three new Xeon 6 CPUs with Performance-cores engineered to support GPU-accelerated AI systems. Intel’s Xeon 6776P was selected by NVIDIA as a host processor for its cutting-edge DGX B300 system.

The company is steadily advancing the development of its next-gen client computing processor, Panther Lake, built on Intel 18A. The processor is scheduled to launch in late 2025. Such development highlights Intel’s growing prowess in AI and management’s strong focus on innovation. This bodes well for long-term growth.

Its stringent cost-cutting efficiency and strategic divestiture to optimize portfolio and business operations are commendable. The company recently divested a part of Mobileye, raising $922 million in capital, and it is also set to sell the Altera business. These initiatives will streamline operations and improve its balance sheet.

Major Challenges for Intel

Intel’s growth prospects are impacted by intense competition from other prominent players. Growing demand for AMD’s Ryzen is impacting net sales in Intel’s Client Computing Group. Qualcomm has also made inroads in the AI PC space with its Snapdragon X Elite processor. This can pose a significant challenge to Intel’s AI PC strategy in the near term. Its Foundry business is affected by fierce competition from TSMC. Per our estimate, Intel’s client computing group is expected to generate $30.42 billion in revenues, indicating an 8.8% year-over-year decline, while revenues from the foundry business are expected to remain flat year over year.

Intel generates a significant portion of its revenue from China. China accounted for more than 29% of Intel's total revenues in 2024, making it the single largest market for the company. Tariff-related uncertainties amid high geopolitical tension between the United States and China remain a major concern. The U.S. Government’s new 90-day tariff truce for China may provide temporary relief, but it is to be seen whether this truce can be sustained in the long run or not. 

Intel is growing through a structural and operational realignment process. The high restructuring and impairment charges incurred during the process are weighing on margins.

Estimate Revision Trend of INTC

Earnings estimates for Intel for 2025 have moved down 48.28% to 15 cents over the past 60 days, while the same for 2026 has declined 10.53% to 68 cents. The negative estimate revision depicts bearish sentiments for the stock.

Key Valuation Metric for Intel

From a valuation standpoint, Intel appears to be relatively cheaper than the industry and below its mean. Going by the price/sales ratio, the company shares currently trade at 1.79 forward sales, lower than 16.28 for the industry.

End Note

Intel is taking various initiatives to gain a firmer footing in the expansive AI sector. Major PC OEMs, such as ASUS, Dell, HP and Lenovo, have already opted to deploy Intel AI chips. The company’s XEON 6 is also gaining traction across industries. Companies like AT&T, Verizon, Samsung, and Ericsson are leveraging Xeon 6 for network transformation and AI acceleration. Growing demand for Intel AI chips bodes well for long-term growth. The company's strong focus on innovation is a tailwind. Strategic divestitures, cost-cutting initiatives to optimize its portfolio and streamline operations are positive factors.

However, the company is still playing a catch-up game with AMD in the AI front. Qualcomm has also emerged as a strong player in the AI PC domain. These factors will hinder Intel’s growth prospects. Downward estimate revision highlights dwindling investors’ confidence. Despite growing investment in advanced chip development, regaining a competitive edge over rivals appears to be a challenging endeavor for Intel. The company currently carries a Zacks Rank 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research