Intel (INTC) Valuation Check After AI Rackscale Launch And New Data Center Partnerships

Intel (INTC) just put its AI data center story front and center, unveiling rackscale AI infrastructure, new Xeon 6+ CPUs built on its 18A process, and partnerships with Foxconn, SambaNova, Siemens, Hitachi, and others.

See our latest analysis for Intel.

The latest AI rackscale push and Foxconn partnership come after a sharp run, with the 90 day share price return of 157.44% and a very large 1 year total shareholder return of 459.18%. Recent 7 day weakness hints at some cooling momentum after AI news driven swings.

If you want to see what else is moving around AI infrastructure and data center demand, it is a good time to scan 48 AI infrastructure stocks

After a move that has turned a US$1,000 stake into several times that in a year, plus a recent pullback and a loss-making bottom line, is Intel still mispriced, or is the market already paying up for future AI growth?

Most Popular Narrative: 14% Undervalued

Intel last closed at $111.78, while the most followed narrative on the stock pegs fair value at $130. That gap is what this story tries to unpack.

Subsequently, let us make a reasonable assumption that Intel Products will be able to sustain its current level of segment Revenues & Operating Profits. I do not think that is too unreasonable as Intel Products does seem to be having some success in this space.

Thus, we shall assume that the sum of Intel Products and Unallocated Corporate Expenses will normalize at about $10b of Operating Profits annually, Intel ex-Foundry OP. This brings the question of profitability back to Foundry, can Foundry become profitable enough to justify the current $60 share price?

Read the complete narrative.

Want to see how one set of revenue, margin and profit assumptions turns $130 into a fair value anchor, rather than a stretch target, for a currently loss making Intel.

Result: Fair Value of $130 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this hinges on Intel turning a US$3.2b net loss around and Foundry moving toward profitability, while recent share price volatility could quickly challenge conviction in a US$130 anchor.

Find out about the key risks to this Intel narrative.

Another View: Cash Flows Paint a Harsher Picture

That $130 fair value narrative suggests Intel looks undervalued, but the SWS DCF model presents a different view. On that cash flow basis, Intel at $111.78 trades above an estimated value of $57.02, which suggests the stock looks expensive instead. So which perspective should carry more weight?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Intel for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 47 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With such mixed signals around value, risk, and reward, it makes sense to move quickly, review the key data points, and build your own view around 1 key reward and 3 important warning signs.

Looking for more investment ideas?

If Intel has you thinking differently about AI and value, do not stop here. Broaden your watchlist and give yourself options before the next big move.

• Scan for potential value opportunities by checking out 47 high quality undervalued stocks that combine quality fundamentals with prices that may not fully reflect them yet.
• Lock in potential income ideas by reviewing 10 dividend fortresses that focus on higher yielding companies with an emphasis on stability.
• Prioritize resilience by reviewing 65 resilient stocks with low risk scores that score well on financial strength and business risk.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com