Let’s break it down.
Why Investors Are Buzzing About Lip-Bu Tan
Intel is at a crossroads. Once the dominant force in semiconductors, the company has fallen behind NVIDIA (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) in high-growth areas like AI and data centers. But the hiring of Lip-Bu Tan, a well-respected figure in the semiconductor world, is turning heads.
Tan is best known for founding Walden International, a venture capital firm specializing in semiconductors, and serving as CEO of Cadence Design Systems (NASDAQ: CDNS) until 2021. He also sits on the board of AI-focused Credo Technology Group (NASDAQ: CRDO), which has doubled in value over the past year.
What does this mean for Intel? For starters, Tan brings:
Deep industry knowledge to navigate Intel’s foundry ambitions
A strong venture capital background to drive strategic partnerships
The connections needed to reposition Intel for future growth
While Intel’s turnaround won’t happen overnight, these strengths could make a big difference.
Cleaning Up Gelsinger’s Legacy
Pat Gelsinger made some bold moves during his time as CEO, but Intel still has a long road ahead. The company became bloated, losing market share while costs soared. Gelsinger did start the painful but necessary process of cutting headcount, but it wasn’t enough to turn things around.
Intel’s recent launches, including the Xeon 6 and the upcoming 18A process, show promise, but execution will be key. While Gelsinger set the stage for a recovery, it’s now up to Tan to complete the transformation.
The Three Key Areas to Watch Under Tan
For Intel to regain its footing, it needs to focus on three critical areas:
Profitability and Margins Intel’s profit margins have been under pressure, and cutting unnecessary costs will be crucial. The company’s Foundry business is currently losing billions, which makes it a top priority for improvement. If Tan can steer Intel toward better profitability, investors will take notice.
Clarity on the Foundry Business Intel has been investing heavily in becoming a contract chip manufacturer, but the strategy remains unclear. Will the company go all-in, form partnerships, or scale back? There’s already speculation about a potential joint venture with Taiwan Semiconductor Manufacturing Company (NYSE: TSM), which could be a game-changer.
AI Inference Market Share AI is booming, and Intel needs to claim a slice of the pie. The company recently announced Jaguar Shores, an AI inference chip utilizing its 18A node. If Intel can produce a cost-effective solution, it could finally compete with Nvidia and AMD in the AI space.
Is Intel Stock a Buy?
According to my discounted cash flow (DCF) model, Intel is currently undervalued. While revenue growth expectations are modest, improving profitability could unlock significant upside.
Intel’s margins used to hover around 20%, but they’ve dipped since the Foundry business expansion. Even assuming a more conservative margin recovery to 11%, the stock has a price target of around $27.70—representing a potential 15% upside from current levels.
The Bottom Line
Intel has a tough road ahead, but Tan’s appointment is a step in the right direction. His leadership, industry experience, and venture capital mindset could bring much-needed discipline and innovation to Intel’s turnaround.
With AI demand soaring and potential partnerships on the horizon, Intel has a shot at redemption. Investors willing to bet on Tan’s ability to execute could find the stock attractive at these levels.
What do you think—can Tan lead Intel back to the top?
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