The last couple of years have been terrific for semiconductor stocks. Well, most semiconductor stocks, that is. Since OpenAI introduced ChatGPT to the world on Nov. 30, 2022, shares of Nvidia and Advanced Micro Devices have risen by 721% and 83%, respectively. By contrast, shares of chip peer Intel (NASDAQ: INTC) have fallen by 25% during this time period.
There’s no doubt that Intel has faced a number of challenges over the last couple of years as its cohorts swiftly move past it in the AI revolution. However, after taking a close look at Intel’s price movement, there could be some reasons to believe the stock is positioned for a rebound.
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Below, I’m going to explore something that Intel’s stock hasn’t done since 2022 and make the case for why I’m cautiously optimistic that better days could be in store for the chipmaker.
The chart below illustrates Intel’s price-to-sales (P/S) ratio over the last three years. The first thing that I noticed is that it bottomed around 1.5 sometime between August and September. The last time Intel’s P/S ratio reached this level was back in 2022 — coincidentally, around the same months in 2022 as well.
What I also noticed is that Intel’s shares started to surge following the ratio’s bottoming at 1.5 in late 2022. Moreover, Intel stock continued moving higher throughout 2023 — only to retrace back to lows during much of this year.
On the surface, investors might think that Intel stock has bottomed and that shares are destined to repeat the upward movements seen in 2023. However, smart investors understand that history is not an indication of future performance. One has to look for actual catalysts — and I see several potential ones right now that could help the stock rebound.
As I pointed out above, Intel’s P/S ratio bottomed somewhere around August and September 2022 and then subsequently went on a run for the ages. You know what else happened during this time period? President Biden signed the CHIPS and Science Act into law on Aug. 9, 2022. And do you know what company has been a major beneficiary of the CHIPS Act? It’s Intel.
Over the last two years, Intel has been awarded tens of billions of dollars in grants and loans as part of CHIPS Act funding. While this looks great on the surface, there are a couple of caveats. Namely, companies rarely receive federal funding the moment an award or grant is announced. In other words, it can take a long time to actually receive this funding. Moreover, sometimes the original dollar amount that was awarded can change.
