Intel Stock to Gain with Mobileye Bet

Intel StockINTC Stock Gearing Up for the Challenge

Intel Corporation (NASDAQ:INTC) is one of the technology giants that is trying to reinvent itself in the emerging age of artificial intelligence (AI).

The AI technology that is powering everything from digital assistants to cloud computing to autonomous driving systems is catching the eyes of investors.

Now the chip maker has made one of its biggest bets by announcing its acquisition of Mobileye NV (NYSE:MBLY), which makes camera systems for autonomous vehicles. Intel stock fell about two percent on Monday following the news, and closed at $35.16.

On Monday, Intel announced that it will acquire Mobileye for $15.3 billion. Intel estimates that the vehicle systems, data, and services market opportunities could be up to $70.0 billion by 2030. (Source: “Intel Acquisition of Mobileye,” Intel Corporation, March 13, 2017.)

According to Intel, “The acquisition will couple the best-in-class technologies from both companies, including Intel’s high-performance computing and connectivity expertise and Mobileye’s leading computer vision expertise…” (Source: Ibid.)

Mobileye stock soared by about 28% to $60.62 on Monday. Mobileye is an Israeli technology company that develops vision-based advanced driver assistance systems providing warnings for collision prevention and mitigation.

The acquisition is one of the biggest business deals in the autonomous driving space, as well as for Intel. The merger is likely to further strengthen the position of Intel, which has been quite active in developing itself as a leading player in the field of autonomous driving.

Intel and Mobileye had announced a partnership last year with Bayerische Motoren Werke AG (FRA:BMW) to create an open platform for the cars of the next generation. The three leading companies had agreed to collaborate to bring automated driving solutions into series production by 2021. (Source: “BMW Group, Intel and Mobileye Team Up to Bring Fully Autonomous Driving to Streets by 2021,” Intel Corporation, July 1, 2016.)

Intel stock has gained about 11% in the past year and has made impressive returns over the long term, as can be seen from the stock chart below. While the current period could see gradual changes in INTC stock prices, the bet on self-driving technology is likely to pay off in the long term.

Intel Stock chart

Chart courtesy of StockCharts.com

Intel Corporation also invested in the German digital mapping company HERE this year and has created a new division, “Automated Driving Group,” to build a future for Intel in the automated car industry.

The acquisition of Mobileye also helps Intel compete better with QUALCOMM, Inc. (NASDAQ:QCOM), which has acquired automotive chip supplier NXP Semiconductors NV (NASDAQ:NXPI).

As Intel Corporation makes a name for itself in the self-driving industry, the technology and connections of Mobileye are likely to be big assets for the chip maker. There could be some pressure on INTC stock in the short term, but Intel stock investors are likely to benefit in the long run from the company’s focus on autonomous driving technology.

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