Intel Stock Soars to 3-Month High Amid AI Sector Surge

Intel shares experienced a significant rally on Tuesday, reaching their highest point in three months. This unexpected surge bucks the long-standing trend of the company’s underperformance, which had seen investors favor rival companies during the artificial intelligence (AI) boom. The semiconductor giant’s stock jumped by 2% to exceed $35 shortly after the market opened, marking its peak share price since April 18. By midmorning, the gains moderated to a more modest 0.2% rise. This boost followed a notable 6.2% increase in Intel’s stock on Monday.

The upswing was fueled by a recent note from Ben Reitzes, an analyst at Melius Research. Reitzes suggested that the historically undervalued Intel stock might be poised for a “seasonal bounce” as part of a broader trend of underperforming stocks catching up. According to Reitzes, Intel’s stock, which has lagged in the AI-driven market, might benefit from this “catch-up trade” due to its lower expectations in the AI sector. In July, Intel has emerged as the third-best performer on the S&P 500, with a 13% gain. This performance trails only Tesla, which saw a 29% increase, and Corning, a glass manufacturer unexpectedly benefiting from AI, which gained 14%.

Tuesday’s rally in Intel’s stock was part of a larger trend in the semiconductor sector. The Philadelphia Stock Exchange’s Semiconductor Index (SOX) rose nearly 1%, with other significant gainers including Nvidia and Micron, both of which saw their shares rise by approximately 3%. Despite Tuesday’s gains, Intel has had a challenging year. The company’s stock was one of the worst performers on the S&P 500 during the first half of 2024, with a year-to-date decline of 32%. Over the past several years, Intel’s performance has lagged behind many of its high-tech peers. For instance, its 12-month return of -10% and three-year return of -33% contrast sharply with Nvidia’s 210% and 560% returns, respectively. Similarly, Advanced Micro Devices (AMD) has seen 58% and 96% returns, Broadcom has enjoyed 112% and 296% returns, and Micron has experienced 122% and 74% returns. The Nasdaq Composite index, a broad measure of the tech sector, has also outpaced Intel with returns of 36% over the past year and 28% over the past three years.

The decline in Intel’s stock is not merely a reflection of its inability to capitalize on the surge in generative AI interest. It also highlights a long-term decrease in earnings. The previous year was notably challenging for Intel, marking the worst revenue year since 2013 and the worst year for net income since 2001. This prolonged period of underperformance has exacerbated concerns about Intel’s future prospects in a rapidly evolving tech landscape. Intel is set to report its quarterly earnings later this month. Analysts are forecasting a modest 0.2% increase in second-quarter revenues. This anticipated growth is a stark contrast to the more than 100% revenue growth reported by Nvidia in the previous quarter, underscoring the competitive pressures facing Intel.

As Intel navigates this critical period, its ability to leverage any newfound momentum from the recent rally will be closely watched by investors and analysts alike. The company’s performance in the coming months will be pivotal in determining whether it can sustain its recovery and compete effectively in the increasingly competitive semiconductor market.