Intel (NASDAQ:INTC) stock has performed extremely well in 2014. Shares of Intel, the world's biggest semiconductor company by market capitalization, have soared 45% year to date, compared to a 12% return for the S&P 500 index. This was due to stabilization in the chipmaker's core business, personal computers, as well as the promise of advancements in some exciting newer areas. Intel has made huge investments in recent years in an effort to get its chips into new products such as smartphones and tablets, as well as in higher-growth businesses including data centers and the Internet of Things.
These high-growth segments will propel Intel into the future. Here are the most promising catalysts for sustaining the stock's rally in 2015.
Data centers, Internet of Things to lead the way
While investors have long hoped Intel would finally make a breakthrough in mobile, that hasn't yet materialized. While Intel aimed this year to get its chips in as many as 40 million tablets, and it is on track to reach that goal, the mobile industry isn't a profitable business yet for the company. That's because mobile is quite costly for Intel. The company spent $1 billion just last quarter to continue building its mobile business. Over the first three quarters of 2014, Intel lost $3 billion in its mobile business. In the same time frame last year, it lost $2.2 billion on this segment.
That's why the most promising businesses for Intel heading into 2015 are data centers and the Internet of Things, which are the company's fastest-growing segments so far this year. Over the first three quarters of 2014, revenue in data centers was up 15%, year over year. In the same period, Intel's Internet of Things group produced 22% revenue growth. Diane Bryant, Intel's senior vice president and general manager of the data center group, said during the company's 2014 investor meeting that Intel expects 15% compound annual revenue growth in data centers through 2018. This is the result of a massive move toward a digital service economy.
The Internet of Things, or IoT, is a particularly exciting development in technology through which mobile, home, and embedded devices could all be connected to the Internet to integrate computing abilities. This would enable all these connected devices to share data over the cloud. Intel's IoT business is spread across several industries, including retail, transportation, and energy. In transportation, Intel is working on technology such as autonomous vehicles and software-defined cockpits in aircraft. But the technology has broader uses that can service virtually any industry, such as the development of smart buildings. Intel believes the technology can be used by as many as 50 billion devices.
Intel set to keep growing, with or without mobile
Going forward, it's crucial for Intel to keep growing in its critical new businesses. Mobile has amounted to little more than a giant money pit for Intel, costing it billions of dollars and standing as a major red flag in its earnings results.
Meanwhile, data centers and the Internet of Things represent Intel's best hopes of producing enough growth to keep its amazing rally intact in 2015.
Bob Ciura has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.