3 Things to Watch with Intel Corporation Stock in 2018
How does the old saying go? Be careful what you ask for because you just might get it? Frustrated Intel Corporation (NASDAQ:INTC), has seen rivals ranging from Advanced Micro Devices, Inc. (NASDAQ:AMD) to NVIDIA Corporation (NASDAQ:NVDA) tiptoe onto its turf and has been clamoring for change. INTC stock is likely to get it in 2018.
It remains to be seen, however, if they’re actually going to like what they’re about to get. Adding to the tension is the fact that just since late August, the INTC stock price has grown more than 30%, indicating investors are expecting big things from the company they haven’t seen in a long while.
If Intel is to live up to those expectations, this is largely what it’s going to look like.
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Intel Has Already Tipped Its Hand
The short version of a long story: Intel, once the king of computers by virtue of its top-shelf processors, has struggled in recent years.
Part of that tepidness stems from the fact that PCs were considerably displaced by handheld devices. Another part of the lethargy, though, can be attributed to the nuances of being the biggest name in a particular business. Intel had little to lose in the 90s, but risk-taking is tougher to muster these days.
It’s still a necessary activity though, since its competitors certainly aren’t holding back.
Fast forward to last week, when Intel CEO Brian Krzanich penned an internal letter (meaning it probably wasn’t meant for current and potential owners of INTC to see) explaining that as of 2018, the company would be taking more risks. His exact words? “The new normal for Intel is that we are going to take more risks.”
There’s not a lot of ambiguity there.
But what, pray tell, might that mean to someone who’s still on the fence with INTC stock?
Truth be told, a second read of Krzanich’s note and a thorough inspection of the Intel news headlines for 2017 largely points to what Krzanich has in mind when he talks about risk-taking.
One of those risks is the rollout of a (long overdue) 10 nm processor chip, which should demonstrate significantly better performance than other CPUs… including the best of Intel’s current product lines.
The next-generation of CPUs is hardly Intel’s only game-changer, however. The company also recently unveiled its latest FPGA (field programmable gate array) technology, the Stratix 10 MX, with two stacks of high-bandwidth 512GB/s memory on board.
It’s the first FPGA product of its type, allowing users an incredible degree of flexibility in that it’s a chip set that can be reprogrammed or reconfigured remotely, including after deployment.
Intel’s FPGA platform is a bit ahead of its time; engineers have yet to design many products with the feature in mind. Once the option is widely available though, Intel’s solution should prove to be a favorite.
The company is thinking more old-school too, planning its own graphics cards that will take on GPU leader Nvidia as well as take on sometimes-awkward partner AMD. Intel even hired an AMD executive, Raja Koduri, to head up the effort.
Though it’s not exactly a cutting-edge business in terms of the underlying technology, there’s a mountain of risk in taking on market-leader Nvidia and a fierce Advanced Micro Devices in that market.
Looking Ahead for INTC Stock
Don’t misread the message. For as much risk as Intel says it’s going to take in the coming year, it’s still remaining true to its roots as well.
That is, the lackluster PC market remains a core source of revenue, and its Client Computing Group (CCG) and data management and data centers in general, undoubtedly will shoulder a great deal of the company’s spending needs going forward.
Krzanich even said in his letter “CCG’s success quarter after quarter is fueling the big bets we’re making in our future.”
Data centers aren’t exactly a work in progress either, though. From here, it’s mostly a matter of scaling-up and more and more organizations move into the cloud and start collecting more information.
Finally, he added:
“It’s almost impossible to perfectly predict the future, but if there’s one thing about the future I am 100% sure of, it is the role of data. Data is becoming the most valuable asset for any company. That’s why our growth strategy is centered on data: memory, FPGAs, IOT, artificial intelligence, autonomous driving. Anything that produces data, anything that requires a lot of computing, the vision is, we’re there.”
Note he specifically mentioned FPGAs as a growth engine.
So, the groundwork for the risks Krzanich was telling INTC investors to look for in 2018 is already laid. The company is certainly likely to add to the list of new projects between now and this time next year, but it’s not likely any of those technologies will be something radically unexpected.
Rather, they’ll be derivatives of the three core initiatives described above.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
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