Intel (INTC +0.00%) investors are having a pretty great week so far -- even if Intel stock isn't yet showing it. The Wall Street Journal reported Wednesday that the U.S. Commerce Department awarded Intel $8.5 billion in subsidies to help defray the cost of expanding semiconductor production in Arizona, New Mexico, Ohio, and Oregon.
This means fully 16% of the $53 billion in government money authorized by the 2022 "Chips Act" will go to Intel alone. Global Equities Research analyst Trip Chowdhry is looking at the news positively and, on Thursday, he raised his price target on Intel stock to a big, fat $100.
NASDAQ: INTC
Key Data Points
Is Intel stock a buy?
Considering Intel stock costs roughly $42 today, that's a huge vote of confidence. Chowdhry's price target implies this $182 billion company will more than double in value over the next 12 months or so. What has him so enthused?
Well, $8.5 billion in free government money is a good start. But beyond that, Chowdhry says Intel is the only company today that can build the kind of power-efficient "next generation" 18A and 14A artificial intelligence processors needed to keep the AI revolution going. ("18A" refers to both the size of the processor -- 1.8 nanometers -- and also its 3D stacked layout).
While other companies such as Advanced Micro Devices and Taiwan Semiconductor Manufacturing are also exploring 3D stacked chips, Intel appears to be the leader. Combined with smaller chips and greater power efficiency, 3D architecture may be enough of a differentiator that, when a bit of free government money is added, Intel can turn itself around this year, then outgrow its rivals in years to come.
That said, there are risks. For one, $8.5 billion only covers about half of the $14.3 billion in cash Intel spent last year on expansion -- and free cash flow is expected to remain negative through 2026. $100 a share is also an aggressive price target for a company that earned only $0.40 per share last year, implying a trailing P/E ratio of 250!
Caveat investor.
