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Why Intel Stock Just Popped

By Rich Smith - Jan 28, 2021 at 3:03PM

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In the middle of a pandemic that's increased demand for computing products, Intel is increasing output.

What happened

One week ago, Intel (INTC -0.86%) unveiled its plan to turn around its troubled semiconductor business. In a reversal of past practice, Intel will begin unbundling semiconductor design from semiconductor manufacturing, and outsourcing more of its chip production abroad. Today, Intel further refined its plans to increase output both in-house and otherwise, and investors applauded.

Intel stock is up 5.5% in response (as of 1:50 p.m. EST).

Stock up glowing green arrow climbs on a stock screen

Image source: Getty Images.

So what

So what exactly is Intel doing? As DIGITIMES reports, the company has recently invested $475 million in Intel Products Vietnam. Added to the $1 billion already invested in "a state-of-the-art chip assembly and test manufacturing facility in Saigon Hi-Tech Park," this takes Intel's investment in Vietnam to nearly $1.5 billion.  

The investment, reports the tech news source, is specifically designed to increase manufacturing of "Intel's 5G products, Intel Core processors with Intel Hybrid Technology and 10th Gen Intel Core processors." And by upping its investment nearly 50%, it can be anticipated that Intel Products Vietnam will be able to increase its output beyond the "more than two billion units" shipped from the facility in 2020.

Now what

Granted, this is an output increase in just one Intel facility within a global semiconductor manufacturing network. Still, it makes the network as a whole a bit more diversified. And the size of the investment seems substantial even in the context of Intel's capital spending budget that ordinarily stretches into the teens of billions of dollars every year (according to data from S&P Global Market Intelligence). It could well be enough to move the needle on analysts' anticipated 7.5% annual earnings growth rate for Intel.

And in the further context of a stock that costs only 11.5 times trailing earnings, and that still pays a 2.6% dividend, it's a good reason to think Intel stock just became a bit more valuable today -- maybe even 5.5% more valuable.

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