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💰 Intel Jumps 22% After $5B Investment From Nvidia

😅 For the past 80+ weeks, I’ve always sent the Weekly Buzz out on Sunday, but with the epic Blossom Investor Conference this weekend, I completely ran out of time, so I was up bright and early today to make sure you’re covered on the big stories this past week… let’s dive in! 🫡

🗞️ The biggest headline last week was the rate cuts - with both the Bank of Canada and the Fed lowering interest rates on Wednesday, driving another green week for the markets:

• The S&P 500 climbed +1.22%

• The Nasdaq 100 climbed +2.22%

• The Canadian TSX index climbed +1.7%

📈 Overall, a really strong week across the board with the gains continuing into today (the S&P 500 is up a nice +0.41% at the time of writing)

💰 Outside of the interest rate drop, there was one major story that we need to cover: Nvidia’s surprise $5B investment into Intel, which sent Intel ($INTC) SOARING +22%, Intel’s biggest jump since 1987…

🔍 So let’s break down what happened, what it means for Intel, and how it impacts the AI race moving forward…

🤝 Rivals Turned Friends? Nvidia Invests $5B Into Intel

📉 Intel’s Fall From Grace

😰 As we’ve covered before in the Buzz, Intel has had a rough last 5 years, with the stock down -42% even with the recent stock jump.

🙏 In September, it reported what was called ‘its worst earnings report ever’ with its former CEO posting prayers on Twitter, leading to hilarious headlines like “Intel CEO reads his last rites.”

❌ Intel, who was the leading player in the CPU race - controlling 80% of the market in the 2010s, missed two major technological revolutions by neglecting smartphones and then GPUs (the chips that power AI), with many investors and analysts basically writing the company off as a sinking ship.

📉 In December, the stock tumbled another 16% after Pat Gelsinger unexpectedly stepped down as CEO.

💰 Intel’s biggest problem was a ‘decade of underinvestment’, which made Intel uncompetitive against the other GPU players…

👀 Signs of a Turnaround?

✅ But since then, Intel has surprised investors, scoring a handful of key wins:

• First was last year when Intel landed a multi-billion dollar deal with Amazon AWS to co-invest in custom chip designs and AI semiconductor manufacturing.

• Then, more recently, the US government invested $8.9B to buy 10% of Intel in a move to bring more chip manufacturing to US soil

✨ In August, I said the #1 challenge for Intel was proving that it can manufacture the advanced AI chips needed to attract customers, and with this last week’s news, it’s looking like the answer is yes (or at least be a part of the AI party)…

⭐️ Nvidia and Intel to Co-Develop AI Chips

⁉️ So why exactly did Nvidia invest in Intel? Well, along with the investment, Intel and Nvidia will be co-developing custom AI chips, combining Nvidia's accelerated computing stack and NVLink interconnect with Intel's x86 CPUs, with Jensen Huang, CEO of Nvidia, describing the collab as a “fusion of two world class platforms.”

🧐 Now if you’re like me, your first thought is probably 'why does Nvidia need Intel’, well, even though Nvidia is the undisputed leader in GPUs, training and inference workloads depend on how quickly CPUs can feed data to GPUs, so Intel’s custom x86 CPUs could improve bandwidth and reduce latency, making ‘more efficient AI clusters.’

🌟 Intel has been struggling to find its place in the AI race, but this partnership is a massive endorsement that shows Intel can play a key role in the AI race after all.

🔍 All right, before we talk about some of the analyst reactions to the news, and my thoughts on how this changes Intel as an investment, a quick word from this week’s sponsor, Public!

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🎯 Analyst Reactions

🤔 So how are analysts reacting to this news, and does it make Intel a more attractive stock to buy?

✅ Well in general most see this as a big positive, with some like Barclays increasing price targests saying that the partnership could lead to ‘higher attachment rates in future AI systems’.

❌ Others like Citi group analyst Chris Danely, disagree, saying that Intel’s +43% year-to-date rally is overblown and prices in the success of Intel’s foundry business (aka chip manufacturing), which he sees as unlikely as Intel faces stiff competition from specialized players like Taiwan Semiconductor ($TSM).

🤷‍♂️ Across the board, analysts are mixed, with a $26 average price target, which sits slightly under the current stock price of $29

💡 My Thoughts

• Intel still has a ton of unresolved technology issues, and it’s unclear whether it can catch up. As we covered in August, Intel was struggling with yield from its foundry and has quite a high ‘execution risk’ with lots of chaos likely driven by the CEO turnover.

• That said, this news is definitely a really good sign that Intel can start profiting off of the AI-race, and compared to other AI plays, some of its key valuation metrics are very low, with a price-to-book value of just 1.4x compared to 44x for Nvidia.

🤔 In all the other times I’ve covered Intel, I had mostly written them off, but this is the first news that actually has me considering joining the nearly 3,000 Blossomers who hold the stock.

❌ In the community though, it looks like folks were mostly taking the stock jump as a selling opportunity, with Intel ranking as the #21 Most Sold and only the #69 Most Bought, so would love to hear what you all are thinking about the stock on Blossom (I’ll make a discussion post later this week).

FROM THE BLOSSOM COMMUNITY
⭐️ 1,400 DIY Investors at the SkyDome in Toronto + Blossom Awards

❤️ Normally, I share some of the top discussions from the community in this section, but today I want to share a quick word of thanks for everyone who came out to the event yesterday!

🔥 The Blossom community is truly unmatched, and I loved meeting so many of you at this event in Toronto and at our events in Vancouver and Calgary!

🏆 One of the things we kicked off at the events was the Blossom Awards - recognizing members of the community who have reached 5,000 followers, a symbol of the value these creators have brought to the community with their thoughtful posts and comments.

🙏 In Vancouver and Toronto, we were thrilled to present 4 such awards! Make sure you check out these accounts and drop them a follow as thanks for all the incredible value they bring to the Blossom community!

• Will W (@williamwang23)

• Paul Santori (@paulsantori)

• Perry’s PIIverse (@perryf)

• Phil (@flipflopfinance)

🎟️ Can’t wait for Montreal, New York, Chicago, and LA - if you're from one of those cities, make sure you grab a ticket here!