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Why Is Intel Stock Surging Today?

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Shares of Intel (NASDAQ: INTC  ) have jumped as much as 3.6% today. The surge instantly repaired the damage that was done to Intel's share price last Thursday, when soft economic reports and weak earnings reports in the tech sector conspired to crush the stock.

I'm not complaining, being an Intel shareholder myself. It's always nice to see your shares soaring, even if it means a higher purchase price for my next DRIP dividend share purchase. For the record, Intel's next dividend check will arrive in a couple of weeks, on September 1, so short-term price swings might actually affect your long-term dividend returns at the moment.

So what did it take to shoot Intel's shares through the roof today?

It wasn't an overall market jump: Intel posted the Dow Jones Industrial Average's (DJINDICES: ^DJI  ) highest overnight jump, and the venerable index is actually down 0.31% in early-afternoon trading.

We're not looking at an overall surge in the semiconductor market, and Intel itself didn't spark today's surge, either. The press roll from Santa Clara is empty, save for the fairly insignificant news that an executive from recently acquired security specialist McAfee got a new job at the Department of Homeland Security. If you're investing in Intel based on nothing but this tidbit, you've got some serious homework to do.

No, all it took to shoot Intel shares skyward was one analyst upgrade. And it's not even a ringing endorsement: Analyst Gus Richard of Piper Jaffray only raised Intel from a "sell" rating to a "neutral" and moved the stock's price target from $20 per share to $22, which is close to this morning's opening price.

Richard's arguments for dropping the "sell" rating are a mixed bag. He says Intel's "Bay Trail" batch of mobile processors looks like a serious player in tablet computers, and I agree with that opinion. But Richard also says Microsoft's (NASDAQ: MSFT  ) termination of its technical support for Windows XP installations could also be a growth driver for Intel. Specifically, corporate buyers are supposed to flock to Windows 8.1 systems built around newer Intel chips.

Color me skeptical.

The refreshed Windows 8 platform might make a difference in portable and consumer markets. But I haven't seen anything that would convince me to bet on that platform in enterprise-class server systems. If anything, expiring XP support might push corporate clients into the proven Windows 7 platform. The newer version is still designed for touchscreen systems above all else, and it doesn't make sense in corporate workstations or servers.

In the end, this is an empty price boost that will deflate when investors forget about Piper Jaffray's unconvincing upgrade. I do believe that Intel deserves higher prices, but I'd never base my investment thesis on a business-class Windows 8 revolution. Intel's real growth-drivers at this point consist of a late but serious start in mobile computing plus a massive lead in the server market. And Windows 8 has nothing to do with the second catalyst.

Intel has a solid smartphone and tablet strategy, but the chip giant is very late to the game. There's no such thing as a free lunch, even for an industry legend of Intel's pedigree. Want to get in on the smartphone phenomenon without betting it all on one platform? One company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either -- in fact, you've probably never even heard of it! But it stands to reap massive profits no matter who ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further."

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 19, 2013, at 4:41 PM, lucasmonger wrote:

    I'd hardly call 3.6% a surge. That's just noise in the fickle nature of Wall Street. Write an article if this perennial non-mover jumps 20-50% in a day or slowly climbs to over $30 per share. Otherwise, don't waste the web space. The real question is why is Anders writing about Intel on a no news day?

  • Report this Comment On August 20, 2013, at 8:40 AM, jvgfool wrote:

    "The refreshed Windows 8 platform might make a difference in portable and consumer markets. But I haven't seen anything that would convince me to bet on that platform in enterprise-class server systems." Why not? You know that Windows 8 is a client operating system don't you? Not a server OS.

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