One of the latest bears on Intel backed down after the stock plummeted

JPMorgan analyst Harlan Sur, who had maintained a “sell” rating on Intel shares for four years, dropped that recommendation on October 19 and assigned the company a “neutral” rating, according to MarketWatch. The chipmaker’s market value has fallen by about 36% from its June high, and the analyst believes the stock has become more attractively valued. He is not yet ready to recommend buying Intel shares, but no longer believes they will underperform the market.

In the past week alone, Intel’s market capitalization fell by more than 14%, or $78.5 billion, and since June 30, the company has lost $226.8 billion in market value, according to Barron’s. According to the analyst, there is a silver lining to this plunge: now that Intel’s stock price has approached JPMorgan’s target price, the risk-to-potential-return ratio has become “much more balanced.”

Sur reaffirmed his price target of $85; however, even after the sharp drop, the price is still 5.4% below the closing price on October 16.

“Despite short-term concerns about the sustainability of AI infrastructure spending, we believe that the growth in agent-based AI workloads—which require significant CPU resources— as well as the extremely limited supply of cutting-edge semiconductors, should contribute to a further increase in [Intel’s] earnings per share forecasts for the upcoming earnings season and through calendar year 2027,” Sur said in a note cited by Barron’s. The analyst also emphasized that JPMorgan’s forecast for Intel’s earnings per share for calendar year 2028 is approximately 15% higher than the Wall Street consensus.

Sur notes that after Lip-Bu Tan was appointed CEO of Intel—having joined the company with the task of pulling it out of a protracted crisis and regaining its lost ground in the processor market— the team began to implement the strategy more effectively and improved competitiveness in key areas. According to Sur, the company has made progress in the production of next-generation chips: it has reduced the defect rate on production lines and improved the readiness of new manufacturing processes for mass production, and is now ready to take on contract orders, Yahoo Finance reports. In addition, the analyst noted Intel’s successes in the field of custom ASIC chips, where the company uses its own in-house designs.

On Monday, October 19, Intel’s stock rose 4.4% after plunging 5.8% on Friday: Investors sold off technology stocks last week due to doubts about the return on multibillion-dollar investments in AI infrastructure and the ability of data center operators to finance further expansion.

Along with Intel shares, stocks of other chipmakers—Nvidia, Micron Technology, and Advanced Micro Devices—rose on Monday. The iShares Semiconductor ETF gained 3.3% and may break its nine-day losing streak.

Intel has become one of four chipmakers whose stocks KeyBanc analyst John Vinh recommended buying ahead of the earnings season, according to Barron’s. The list also includes Nvidia, RAM manufacturer Micron, and power management chip developer Monolithic Power Systems.

Developments in the financial markets last week showed that, even with demand remaining high, the further expansion of AI infrastructure depends much more on the debt markets than previously thought, noted William Blair analyst Richard de Chazal. Rising interest rates could slow lending to the main customers of chip suppliers. This poses a risk for Intel: if data center construction outside of the largest tech companies slows, the growth in demand for server processors—which is currently driving the company’s recovery—could also lose momentum. “In our view, this is similar to a situation where a landlord takes out a large loan to build an office complex, and three major tenants occupy most of the space. The lease agreements look solid, but if one of the tenants leaves or demands a lower rate when the lease is up for renewal, the mortgage obligations will still fall on the landlord. “That’s why investors are now demanding additional compensation for this risk,” Barron’s quotes de Chazal as saying.

Wall Street is taking a cautious view of Intel’s prospects: 32 of the 52 analysts covering the chipmaker’s stock advise holding it in their portfolios, while 19 recommend buying it. Only one analyst remains skeptical—an analyst at Rosenblatt, according to MarketWatch data.

That said, the average target price is much more optimistic: it implies a 33% rally over the next 12 months.

This article was AI-translated and verified by a human editor