The “unpopular” stock that can beat the pants off Nvidia

Before we dive into today’s Smart moneyfirst of all, thank you to everyone who joined me on thursday for The road to the AGI Summit. Thousands of you all joined me making it a huge success.

At the event we discussed…

• How Wall Street is currently asleep at the wheel on top of the revolutionary advance of Artificial General Intelligence…
• An exclusive look inside Big Tech’s secret frontier AI labs…
• And my “future” project for a rapidly accelerating world of AI.

If you missed this informative event, you can click here to access the playback.

Now, in the wake of all that, let’s focus on a well-known tech company that will use AGI to create some possible new avenues of success.

This may come as a surprise as this company has been making headlines recently…albeit of the wrong kind. A recent disappointing quarterly earnings announcement triggered a massive 30% selloff.

However, I expect this tech company’s unpopular stock to outperform the wildly popular stock of Nvidia Corp. (NVDA).

So, I’m not abandoning this company just yet. Here’s why…

Bet on Little League

The company I am referring to is Intel Corp. (INTC).

Of course, based on financial results over the past few years, Nvidia and Intel aren’t even in the same league. Nvidia is a member of the Major League, while Intel is a member of the Little League. The stock valuations of both companies fully reflect their differences.

For most of the past two decades, both stocks have traded at a similar valuation based on enterprise values ​​(age) to sales. But today, Nvidia trades at 32x, while Intel trades at less than 2x EV to sales.

Nvidia’s high-flying stock anticipates Hall of Fame results, while Intel’s depressed stock anticipates endless disappointments. It reflects a company that will continue to bench at the Little League level for a long time.

But therein lies today’s opportunity.

Even modest signs of improvement could propel Intel to much higher levels. And I believe the company’s long-term strategy will succeed…and generate substantial long-term profit growth.

The worthy cost of AI investments

Intel’s core strategy is to become the dominant domestic semiconductor manufacturer while enhancing the competitive strengths of the chips it designs.

These goals are still within reach, but they are expensive and difficult to achieve. Intel is spending tens of billions of dollars to advance its goals, which is crippling its near-term profitability and straining its balance sheet.

The more the price rises, the fewer investors applaud Intel’s strategy. They think it’s just too expensive and too risky. Maybe so, but Intel doesn’t have the luxury of resting on its laurels.

No tech company ever does.

The technology business is always and forever a fast-obsolete business. That’s why it’s a business that requires massive and ongoing capital expenditure and research and development… especially in the wild and wild world of artificial intelligence.

Artificial intelligence is the most creative—and destructive—technological force humanity has ever encountered, which is why all the big tech giants are ramping up capital spending to prepare for it.

In January, for example, Meta Platforms Inc. (META) announced that it will spend about $30 billion this year on new technology infrastructure. In April, the company raised that figure to $35 billion. Then Meta CEO Mark Zuckerberg raised the figure again to $37 billion.

Intel is making an equally massive commitment to the AI-centric world it anticipates. And as AGI advances, Intel may find some success in the technology, particularly in robotics development. As Thomas Yeung noted in a recent Fry’s Investment Report weekly update (subscription required)…

Figure 2.0 and other humanoid robots, for example, require the kind of on-board processing that Intel has traditionally excelled at. Although Nvidia will continue to dominate computing at the data center level, autonomous robots will need the kind of integrated AI chips that Intel is developing now. Self-driving vehicles and other smart devices will have similar requirements.

So while critics might say Intel can’t afford to make these AI investments, I say it can’t not to make them.

To discover other ambitious companies that will thrive as we move towards super-advanced AI, be sure to check out my The road to the AGI Summit. once again, you can access the replay by clicking here.

Sincerely,

Eric Fry