We recently published a list of 10 AI Stocks to Watch for the Rest of 2024. In this article, we are going to take a look at where Intel Corp (NASDAQ:INTC) stands against other AI stocks to watch for the rest of 2024.
Talking about the latest market situation during a program on CNBC, Julian Emanuel, Evercore ISI senior managing director, said that despite the ups and downs that have happened since the pandemic, the US remains an economy that is “envy of the world.” The analyst urged investors to pile into stocks that have historically performed well after the Fed started cutting rates and hinted at the expected “turbulence” related to US elections.
“We love what we call the Fed rate cut playbook. You go back to 1970, you look at all the rate cutting cycles, there’s a very pronounced outperformance in the year after the Fed starts cutting from info tech, surprise surprise. Small caps, which might be a bit counterintuitive considering how much they took it on the chin today, but also, barbelled by the more defensive sectors, consumer staples and health care. So, to us, that’s sort of the sensible way that will help you ride out if you get some turbulence, which, obvious, if there’s a contested outcome, you’re likely going to get some turbulence.”
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Pointing to market volatility, Emanuel said that the “wall of worry” is still strong.
“The wall of worry is still very, very intact. And if you think about it, yeah, the VIX is low compared to maybe longer run history, but actually, if you think about the inertia of the markets the last several weeks, the VIX is high, and it should be, in front of probably one of the biggest unknowns we’ve been facing, certainly in the last four years, if not longer.”
For this article we picked 10 AI stocks trending based on latest news. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician soldering components for a semiconductor board.
Intel Corp (NASDAQ:INTC)
Number of Hedge Fund Investors: 75
Goldman Sachs has cut its earnings estimates for the semiconductor giant, pointing to “muted” demand for PCs.
“…[W]e reduce our 2025/26 non-GAAP EPS (excl. SBC) estimates by 7% as we reflect a slower recovery in the PC CPU and FPGA businesses, partially offset by a more constructive outlook for server CPUs,” analyst Toshiya Hari wrote in a client note. “While we believe management is taking steps to right-size the organization, we remain cautious on the stock as we have yet to see signs of a return to process technology leadership. In fact, Intel may continue to outsource a significant portion of its client CPU tiles to TSMC beyond 2025, according to our checks, and the company still lacks a major presence in the profitable data center accelerator market.”
Hari kept his Sell rating and a $21 price target on Intel Corp (NASDAQ:INTC).
Intel faces challenges as it navigates a major restructuring plan, which includes cutting around $10 billion in operating expenses and reducing its workforce by 15,000 this year. Inte is only expected to achieve free cash flow positivity by 2025, and for 2024, it anticipates modestly negative adjusted free cash flow due to restructuring costs and reduced capital spending.
Intel’s plan involves lowering operating expenses to about $17.5 billion while keeping net capital expenditures between $12 billion and $14 billion in 2025. However, with $25 billion in net debt and ongoing restructuring, the path to recovery and rebound for Intel is long.
ClearBridge Large Cap Value Strategy stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter:
“While the market environment clearly was a headwind in the third quarter, several of our large positions also faced challenging conditions, which negatively impacted results. In the information technology (IT) sector, Intel Corporation (NASDAQ:INTC) has come under additional pressure due to continued softness in the company’s core PC and server markets as well as concerns on the company’s longer-term competitive position. While Intel’s turnaround is not happening overnight, we are constructive on the outlook into 2025: the company’s product positioning should be much improved and it should be positioned to gain market share in a cyclical upswing in which it has strong earnings power. A somewhat adverse spending environment due to AI myopia has weighed on shares, but we still think the market is undershipping PCs and general servers following a COVID normalization period that saw demand get pulled ahead and then languish as companies froze IT budgets. The installed base is now getting older, and we expect a strong refresh cycle into next year. The delay is actually beneficial to Intel, whose product positioning will be all the more improved. While our investment case is not predicated on an M&A transaction, and we believe one is unlikely, the expression of interest in the company speaks to the value of the assets, which we think still trade at a meaningful discount to fair value.”
Overall, INTC ranks 7th on our list of AI stocks to watch for the rest of 2024. While we acknowledge the potential of INTC, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than INTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.