Yahoo Finance If You Think Intel Is Dead Money, Think Again
- By Harsh Jain
It was almost a flat year for Intel (INTC) in 2016, as the stock was up roughly 5% over the year. In comparison, most of the Intel's competitors such as Advanced Micro Devices (AMD), Qualcomm (QCOM) and NVIDIA (NVDA) delivered huge returns to stockholders. However, that does not means Intel is out of the game, as it still holds 80% market share in the worldwide microprocessor market mainly due to its leading position in the PC industry.
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The company has been generating huge profits by selling high-end desktop processing chips to data centers. It is highly likely that CPUs will continue to see reasonable growth in data centers, as the company requires huge computation power to make use of the big data they have gathered.
According to marketsandmarkets.com, the data center market is projected to reach $32.30 billion by 2020 from $18.56 billion in 2015, which represents a compound annual growth rate of 11.7%. This clearly means that more data centers will eventually result in higher demand for core processor chips, which is a positive for Intel.
Intel completed several acquisitions in the past year to enhance its technical capabilities in vital areas. Most significant was the acquisition of deep learning start-up Nervana Systems.
Intel believes that artificial intelligence signifies the next gigantic transition inside corporate data centers. Moreover, the company also detailed that the shift to AI could dwarf the move to cloud computing. As an outcome, the chips manufactured by Nervana, when combined with Intel's server processors could strengthen the company's position in the data center segment.
On the other hand, the company also formed an alliance with BMW (BAMXF) and Mobileye (MBLY) in an effort to gain a strong lead in the autonomous car market. The alliance is on its way to launch its 40 self-driving cars testing program by the second half of 2017. BMW targets to launch its first fully autonomous car in 2021.
Most significant thing to notice is that the deal between these three companies was signed less than a year ago, and it is very striking that they are starting their testing program so soon. This could certainly provide a boost to Intel keeping in mind the positive outlook of the self-driving cars market.
Summing up
It is true that Intel failed to deliver huge returns to stockholders in 2016. However, the company has performed very well, as it completed several key acquisitions that will certainly help the company in the next few years.
Intel's push towards the self-driving cars market will reap huge profits in the forthcoming years. As a result, Intel is a solid long-term buy.
Disclosure: No position in the stocks mentioned in this article.
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This article first appeared on GuruFocus.
Warning! GuruFocus has detected 6 Warning Signs with INTC. Click here to check it out.
The intrinsic value of INTC