Will Intel Be a Trillion-Dollar Stock by 2030?

Intel (INTC -9.20%) has been a perennial underperformer on the stock market for a very long time. This is evident from the fact that the stock's price has remained almost flat over the past five years, which pales in comparison to the tech-laden Nasdaq-100 Technology Sector index's outstanding gains of 148% during the same period.

However, 2023 was a solid year for Intel investors. The stock gained an impressive 60% last year and outpaced the Nasdaq-100's 50% gains. The solid rally has brought Intel's market cap to $199 billion. But can Intel sustain this red-hot momentum over the long run and join the trillion-dollar market cap club by 2030? Let's find out.

Intel's future could be rosier than the past

Intel failed to excite the stock market over the past five years because of its poor financial performance, which can be attributed to the company's market share losses to Advanced Micro Devices (AMD 2.37%) and its inability to capitalize on hot tech trends such as gaming graphics cards and consoles.

As a result, Intel's earnings eroded at an annual rate of almost 31% over the past five years. However, analysts now expect its earnings to increase at an annual rate of 10%-plus for the next five years, suggesting that Intel's fortunes could turn around. The good part is that Intel's revival is expected to begin in 2024 (see table below).

Source: YCharts and Yahoo! Finance. YOY = Year over year.

The chart above tells us that Intel's earnings growth is expected to accelerate significantly in 2024 and 2025 following last year's steep decline. There are two primary reasons why Wall Street is forecasting a big jump in Intel's growth -- the revival of the personal computer (PC) market, and the growing demand for artificial intelligence (AI) chips.

According to market research firm IDC, PC shipments declined an estimated 14% last year. IDC predicts a 3.4% increase in shipments this year, driven by an aging installed base of commercial PCs that need to be upgraded, and the integration of AI capabilities into new PCs from 2024. More importantly, the arrival of AI-enabled PCs is likely to drive a multi-year growth in this market.

That's because sales of AI-enabled PCs are expected to grow at an annual rate of 50% through the end of the decade, according to Counterpoint Research. Intel has started capitalizing on this opportunity with its Core Ultra processor, which the company says "will power more than 230 of the world's first AI PCs from partners including Acer, ASUS, Dell, Dynabook, Gigabyte, [Alphabet's] Google Chromebook, HP, Lenovo, LG, Microsoft Surface, MSI and Samsung."

This looks like a smart move from Intel, as the AI PC market is about to take off, and the wider availability of its AI-focused central processing units (CPUs) could give it an advantage over AMD. AMD pointed out in its October 2023 earnings call that it has "more than 50 notebook designs powered by [its] Ryzen AI in [the] market."

It's worth noting that AMD has been gaining ground in the client CPU market. According to Mercury Research, AMD controlled 19.4% unit share of the market for laptop and desktop CPUs in the third quarter of 2023, up from 15% in the year-ago period. So, Intel's focus on rolling out its AI CPUs for notebooks and desktops more widely could help it stem the market share losses and unlock a new growth opportunity.

On the other hand, Intel's AI-focused data center processors are gaining healthy traction. Data analytics platform provider Databricks (via VentureBeat) recently pointed out that Intel's Gaudi 2 accelerators can give market leader Nvidia's H100 and A100 data center graphics cards a run for their money during AI inference. Databricks adds that the Gaudi 2 was no slouch during AI training either, as it was the second-fastest chip -- following Nvidia's H100 -- while training large language models (LLMs) on a single node.

Even better, the Gaudi 2 AI accelerator provides the best performance-per-dollar -- higher than both the H100 and the A100 -- for both training and inference applications as per Databricks. Not surprisingly, Intel's AI accelerator chips are gaining solid customer interest. The company pointed out in October 2023 that its customer pipeline for the Gaudi processors nearly doubled in a space of just three months.

This could pave the way for solid growth at Intel. The market for AI chips is set to take off, generating an estimated $305 billion in annual revenue in 2030 compared to just $22 billion in 2022, according to Next Move Strategy Consulting. It won't be surprising to see Intel stock sustaining its newly found momentum over the long run, considering the catalysts discussed above, but will that be enough to help make it a trillion-dollar company?

Can Chipzilla hit the trillion-dollar milestone?

We saw in the table earlier that Intel's earnings are anticipated to increase rapidly in 2024 and 2025. The five-year earnings growth forecast, however, still remains at a muted (but respectable) 10% a year. However, we have seen that the booming demand for AI chips has the ability to significantly boost a company's bottom-line growth, as in the case of Nvidia.

Assuming that the demand for AI PCs and Intel's AI server chips lifts its annual earnings growth rate to 20% and the company manages to sustain that through 2030, its earnings could increase to $5.64 per share by the end of the decade (using its 2024 earnings forecast of $1.89 per share as the base). Multiplying that with the Nasdaq-100's (using the index as a proxy for tech stocks) forward earnings multiple of 28 points toward a stock price of $158 in 2030.

That would be 3.2 times the company's current stock price, indicating that Intel may not become a trillion-dollar company by 2030, considering its current market cap of $199 billion. However, what's worth noting here is that Intel seems set to deliver significant upside over the next seven years, even though it may fall short of that milestone.

What's more, if the company manages to achieve even stronger earnings growth and trades at a more premium valuation thanks to its AI-fueled growth, it may eventually go on to join the trillion-dollar club. That's why investors should consider buying this high-flying semiconductor stock right now. It's trading at a relatively cheaper 26 times forward earnings when compared to the Nasdaq-100's forward earnings multiple, and it may not be available at an attractive valuation in the future if the stock keeps flying higher.