Intel Stock is Poised for Huge Growth
Although many investors think of Intel Corporation (NASDAQ:INTC) as a boring blue chip company, Intel’s stock outlook in 2016 has enormous upside. The semiconductor industry is in the middle of a battle royale, and I think INTC stock could be the last firm standing.
When considering the possible gains for Intel in 2016, you have to think in strategic terms. The microprocessor chips that underlie Intel are reaching a transition point, where new breakthroughs are required to stay ahead of the pack.
I like Intel stock because it is handling a changing market with poise. A lot of incumbent firms don’t react as well. Intel has pivoted away from chips designed for personal computers to memory chips housed in smartphones and other devices.
Moreover, Intel stock could surge if the company completes an acquisition of Altera Corp. Adding Altera’s portfolio of products would bolster Intel for the intra-industry war that’s about to commence. But more than either of those two reasons, Intel has the advantage of being the biggest kid on the playground.
As the increased competition begins to squeeze margins, Intel can afford to produce at scale, thus driving out its smaller rivals.
INTC Stock Could Soar for 3 Reasons
In the last year, we’ve seen $136 billion worth of mergers and acquisitions in the semiconductor space. Everyone is pairing up to strengthen their portfolios and capital buffers so they can survive the melee. But Intel stock is already a heavyweight.
Slowing computer sales have hurt INTC stock this year, but that hardly matters. The outlook for Intel stock over the mid- to long-term doesn’t depend on computers; it is contingent on the “Internet of things,” or IoT.
IoT is a movement which would make household devices “smarter” by adding sensors and Wi-Fi connectivity. The IoT has become a really popular idea in tech circles, and many companies are gearing up for the markets it will open. (Source: “The Internet of Things Is Far Bigger Than Anyone Realizes”, Wired, last accessed November 5, 2015.)
Intel will benefit enormously from this trend, seeing as it already made the shift towards those types of memory chips. Intel can achieve economies of scale in the “Internet of Things” market much quicker than its rivals, giving it a competitive edge.
Buying out Altera would also help Intel stock supplement its product offerings. The prospect of higher INTC stock is an imminent reality when you factor in the untapped market of the IoT. Although the “Internet of Things” may seem like a vague and distant concept to the layman, Silicon Valley is already prepped for the profits.
Why Intel Stock is a Winner
I’m particularly bullish on Intel stock because the firm was able to innovate despite decades of dominance. It’s nice to know INTC stock is in good hands.
After all, microprocessors haven’t changed much over the lifetime of Intel stock. That is to say, the fundamental design of how chips function, were roughly the same for decades.
INTC stock appreciated simply by the company reducing the size of chips so they could process logic commands more quickly, but the company wasn’t compelled to do much else.
All Intel had to do was follow Moore’s Law. In 1965, a co-founder of Intel named Gordon Moore wrote a paper in which he argued that the number of transistors on a microprocessor chip doubles every two years. Put into plain English, that means the speed of a chip doubles every two years.
Moore’s Law has held up pretty well over recent decades, pushing INTC stock continuously higher. But now it is breaking down, threatening to end the bull market that brought Intel stock to where it is today.
Lucky for us, Intel is willing to fight the good fight.