Skin in the Game: The US Government & Nvidia Back Intel

Intel Company Overview

Zacks Rank #3 (Hold) stock Intel (INTC) designs and manufactures a plethora of computer hardware and software products for individuals and businesses. Founded in 1968, the Santa Clara, California-based Intel is best known for its microprocessors (CPUs) that act as the “brain” behind many popular personal computers and servers. Intel’s graphics cards (GPUs) are also helping to power the burgeoning cloud computing and artificial intelligence industries.

Intel Enters Agreement with US Government

The CHIPS and Science Act was a landmark bill signed into law under the Biden Administration in 2022. Amid the ongoing loss of manufacturing jobs in the United States and the increasing threat from China on Taiwan’s sovereignty (most semiconductor manufacturing is currently in Taiwan), the bill concentrates on ensuring that the US on shores some of its domestic semiconductor manufacturing. Intel, one of the primary beneficiaries of the legislation, was awarded an $11.1 billion grant.

Although the massive amount of money was initially a handout, the Trump Administration secured a 9.9% stake in Intel for American taxpayers after a contentious spat between President Donald Trump and Intel CEO Lip-Bu Tan. If Intel was initially supposed to receive a handout but now has given up equity, why is the deal bullish for Intel? Simply put, the US government now has “skin in the game” and the motivation to ensure Intel is a good long-term investment for the US taxpayer.

Nvidia Investment Gives Intel Life

Intel, once the undisputed leader in the semiconductor industry, has been left behind by companies like Advanced Micro Devices (AMD) and Nvidia (NVDA). However, last week,Nvidia, the leading AI chip company, announced that it will provide a lifeline to Intel, promising to invest $5 billion inIntelstock and collaborate on AI and data centers. Intel jumped more than 20% on the news, printing its highest level since mid-2024. The deal with Nvidia breathes new life into the company, and like the US government deal, ensures that key players have “skin in the game.”

Intel is Cheap

The price-to-book ratio is a key valuation indicator. INTC has a P/B ratio of 1.19x, which makes it relatively inexpensive compared to the S&P 500’s ~4.6 P/B.

INTC Technical View

Following the NVDA news, INTC shares spiked 22% as volume turnover surged 390% above the norm – a sign of massive accumulation. After a uniform bull flag correction, shares are primed to move higher.

INTC: A Leader in AI Infrastructure and Autonomous Car Technology

Intel is gaining solid market traction in the AI infrastructure market. Super Micro Computer (SMCI), a global leader in high-performance, energy-efficient IT solutions, is deploying INTC technology for large-scale databases (the fastest-growing industry on Wall Street). Meanwhile, the Mobileye acquisition has helped the company to penetrate the rapidly growing autonomous car technology market.

Bottom Line

Despite years of struggle, Intel is on the cusp of a significant turnaround. The US government’s equity stake, Nvidia’s investment and collaboration, and Intel’s foundational role in AI make for an attractive investment.

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