Intel’s AI Chip Unveiling and the Battle for Supremacy: Betting on Intel in 2024

In the fast-paced world of technology, innovation is the name of the game. This week, Intel fired a significant shot across the bow of competitors AMD and Nvidia by introducing its new AI chip, Gaudi3. As the race for AI dominance intensifies, Intel’s latest move not only caught the attention of tech enthusiasts but also piqued the interest of investors looking to capitalize on the evolving landscape of artificial intelligence. In this article, we’ll delve into Intel’s recent developments, the potential it holds in the AI chip wars, and an aggressive options strategy to bet on Intel’s resurgence in 2024.

Intel’s Bold Claim and Stock Surge

Intel’s stock recently reached a fresh 52-week high, driven by CEO Pat Gelsinger’s bold proclamation that Intel’s new AI chip surpasses Nvidia’s H100. This bit of tech industry trash talk generated excitement among investors, especially if Intel’s claims hold true. Gelsinger’s statement has set the stage for an intriguing battle for AI supremacy.

While financial specifics were not disclosed during Intel’s “AI Everywhere” event in New York, it’s worth noting that Intel has been diligently developing its new chips for data centers and laptops since 2019 when it acquired chip developer Habana Labs. Initially, Intel’s stock saw a 5% uptick in response to the news, followed by a slight retreat, ultimately closing up 1% on the day. This relatively muted market reaction could potentially signal an opportunity for Intel’s stock to rally when the broader market recognizes its significant AI potential.

AI’s Ascendant Role

Artificial intelligence has rapidly emerged as a transformative force across industries. From healthcare to finance, AI is driving innovation, efficiency, and competitive advantage. Investors are increasingly seeking exposure to the AI sector, recognizing its potential to reshape entire industries.

Intel’s Comeback Story

While Intel has had its share of challenges, including a declining PC market and past missteps, 2023 has seen a remarkable bounce-back for the company, with its stock surging by 75% year-to-date. Despite this resurgence, when comparing Intel (INTC) to Nvidia over the past three years, it’s clear that Intel has faced rough seas. However, CEO Gelsinger’s strategic focus on AI presents an opportunity for the company to regain its footing and potentially return to the levels it traded at just a few years ago, hovering near $60 before Nvidia’s dominance.

Intel’s “AI Everywhere” Portfolio

On December 14, 2023, Intel unveiled its “AI Everywhere” portfolio, which encompasses a range of artificial intelligence products aimed at enabling AI solutions across various domains, including data centers, cloud computing, networks, edge computing, and personal computers (PCs). Notable products introduced include:

1. Intel Core Ultra Mobile Processor Family: The first processors built on Intel 4 process technology, delivering power-efficient client processors and ushering in the era of the AI PC.
2. 5th Gen Intel Xeon Processor Family: These processors are designed with AI acceleration integrated into every core, promising significant leaps in AI and overall performance while reducing total cost of ownership.
3. Intel Gaudi 3 AI Accelerator: This AI accelerator, scheduled for release next year, marks a significant step in Intel’s AI offerings.

Analysts’ Perspectives

Analyst opinions on Intel’s recent developments are mixed. While some analysts see promise in Intel’s AI endeavors, others remain cautious. Citi analysts, for instance, view Intel’s AI event as “much ado about nothing” and maintain a Neutral rating on the stock. They highlight Intel’s omission of revenue targets for 2024, which suggests limited sales in their view.

On the other hand, BofA upgraded Intel to Neutral from Underperform, citing secular growth tailwinds in Generative AI, chip complexity, auto content, fab reshoring, and CHIPS Act benefits. They also raised their price target to $50, up from $32.

Roth MKM analyst Suji Desilva raised the firm’s price target on Intel to $45 from $35, highlighting the full range of AI-enabled processor products introduced by Intel. These products leverage Intel’s improving manufacturing node ramp and core processor, GPU, and AI accelerator technologies.

Bottom-line: Intel’s foray into the AI chip wars has stirred excitement and debate within the tech and investment communities. With AI poised to play an increasingly pivotal role in various sectors, including real estate, healthcare, and finance, Intel’s AI-focused strategy presents an opportunity for growth and resurgence. While the battle for AI supremacy continues, investors eyeing Intel’s resurgence in 2024 can explore aggressive options strategies to position themselves for potential AI-driven gains. As we navigate the dynamic world of technology, Intel’s journey in the AI landscape will undoubtedly be one to watch in the coming year.