Investors have very few expectations for Intel (NASDAQ:INTC) stock. After falling behind on innovation, the company allowed Advanced Micro Devices (NASDAQ:AMD) to grow to an enormous size.

A former industry leader, INTC stock now trades at a market capitalization that is barely double that of AMD stock.

Bulls dumped INTC stock earlier this year. The stock has been stuck in range between $52 and $56. It will open today at around $55.20.

Intel changed its spending strategy under its new Chief Executive Officer Pat Gelsinger. It will increase its factory investments to manufacture chips in-house. This is an aggressive approach.

Still, the company will not expose itself to political and geographical risks. The BBC reported that Intel will no longer consider building a factory in the U.K. It cited Brexit as the reason to avoid the factory build in the region.

Gelsinger said he will look at how the support between the European Union countries and the U.K. plays out first.

Intel’s inclusion of the U.K. on the shortlist of potential fab sites is unusual. The region did not historically have any wafer fab experience. It does not have the infrastructure for supporting growth for the factory, either.

Intel has a massive capacity in Israel and Ireland already. It may have trouble expanding in Israel, due to the limited availability of skilled workers and may complement its investments by building a plant in Germany instead.

A Closer Look at INTC Stock

The IPO of GlobalFoundries could boost the attractiveness of Intel stock. The firm is seeking a market valuation of around $25 billion. Should the stock soar on the first day of trading, investors may notice Intel’s cheap valuation instead. The market values Intel at a price-to-earnings of 12.1 times. The dividend yields 2.55%.

Income investors would benefit by accumulating the stock at current levels while collecting a dividend. The company is extending its growth in autonomous driving through Mobileye.

Its core computer chip business is still highly profitable, and the CPU refresh abilities will continue to attract its loyal customer base.

For example, the Intel Ice Lake workstation is a positive catalyst. The chip has up to 38 cores, consumes no more than 270 Watts and supports chip memory of up to four terabytes.

Intel Graphics Card

Intel’s long-awaited return to the discrete graphics card market is a huge catalyst. AMD and Nvidia (NASDAQ:NVDA) are getting away with GPU launches that cost more and offer hardly any performance increase. The news leak on the Intel GPU points to an Intel ARC Alchemist card that competes with the Nvidia RTX 3070.

That is Nvidia’s flagship GPU.

Intel’s ambitious GPU release may offer more than markets expect. It may launch a card that outperforms Nvidia’s high-end 3070 Ti card.

Intel’s Xe HPG architecture is impressive. The first-generation card has 16 vector engines and 16 matrix engines. Since it supports the DirectX 12 Ultimate feature set, the card will have ray tracing, mesh shading, sampler feedback, and variable rate shading.

Intel may update the GPU drivers to improve performance. This will likely win the gaming community’s loyalty and praise.

By starting at a zero market share, Intel must create a positive buzz. Fans will post reviews on YouTube, creating even more buyer interest. In a short time, Intel will take AMD and Nvidia’s market share.

Valuation and Your Takeaway

On Wall Street, 24 analysts are neutral on Intel’s prospects, 10 rate the stock as a “hold,” according to Tipranks. The average price target is $60.43.

Analysts are missing valuing the benefits of Intel’s capacity expansion in the U.S.

The U.S. infrastructure bill will help Intel Foundry Services. This will enable a supply chain diversification away from Asian firms. The chip shortage taught customers not to rely on companies operating in that region.

Markets are ignoring the sleeping giant. Intel has a strategy to expand its chip capacity, as it manufacturers locally. Its graphics card launch has the potential to take AMD and Nvidia by surprise.

Those firms took advantage of consumers who are more than willing to pay more than retail for the GPUs. Intel could even sell its new graphics cards at a premium and below that of the competition. Within a few quarters, it will gain market share. This will lead to expanding profit margins.

Intel already sells its CPUs at a healthy profit. The refresh will help Intel sustain that. The stock does not reflect Intel’s strong profits in 2022. The time to look at the stock again is now.

— Chris Lau

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Source: Investor Place