Intel: An Emerging Powerhouse in the AI Arena, Says Analyst

Intel INTC

Intel (NASDAQ:INTC), a renowned name in the tech industry, is gradually establishing a strong foothold in the artificial intelligence (AI) domain, as suggested by an analyst from Melius Research. The analyst emphasized that investors should closely monitor Intel’s forthcoming actions in this rapidly evolving sector.

Ben Reitzes, an analyst at Melius Research, has given Intel a “Buy” rating with a price target of $46. This represents a 26% rise from the stock’s closing price on Friday.

Traditionally, Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) have been the frontrunners when it comes to AI, as investors often associate these companies with top-tier performance in this field. However, Intel is steadily gaining traction with its AI chip, Gaudi. The chip has been generating significant buzz in the industry lately, contributing to Reitzes’ optimistic outlook for Intel’s stock.

The Gaudi chip, optimized for deep learning model development, not only facilitates the migration of existing GPU-based models to its platform but also integrates seamlessly with tools like PyTorch. Its second-generation version, Gaudi2, is designed to enhance vision modeling applications crucial for autonomous vehicles, medical imaging, and defect detection.

Moreover, it has been reported that the Gaudi2 significantly outperforms NVIDIA A100 in terms of training performance and throughput. This has led to speculation that Intel is building a massive internal cluster based on its Gaudi AI accelerator, which could give it a competitive edge in the AI race.

So, while Nvidia and AMD still hold significant positions in the AI sphere, Intel’s emerging presence, particularly with its Gaudi chip, is disrupting the status quo. Therefore, according to Reitzes, it’s time for investors to turn their attention to Intel’s escalating progress in the AI arena.

Reitzes asserts that Wall Street has yet to account for the potential impact that this AI chip could have on the company’s primary revenue stream in the coming years.

Even though Intel must persist in advancing their software capabilities, the possibility of generating hundreds of millions in revenue from Gaudi is not reflected in the financial market forecasts, according to Reitzes’ research note on Monday.

In the most recent earnings call of the chipmaker in July, CEO Patrick Gelsinger said that Intel’s “4th Gen Xeon and Habana® Gaudi®2 are two strong, open alternatives in the AI market that compete on both performance and price versus the competition.”

Reitzes isn’t the sole analyst expressing optimism about Intel’s future in AI. Srini Pajjuri, an analyst at Raymond James, echoed this confidence by maintaining his ‘Outperform’ rating and setting a $42 price target for Intel on Thursday. In his note, he emphasized that “while Intel won’t likely get much credit for its AI efforts in the near term, we believe that the company is well positioned.”

In his commentary, Reitzes underscored the notion that even though Intel might not receive significant recognition for its advancements in AI in the near term, it’s the firm’s belief that the $159 billion market cap company is “well positioned.”

Price Action

Intel shares were trading down by 1.36% at $34.18 at the time of publication. The name is up 29% year-to-date and more than 24% year-over-year.

Reference: Barron’s

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