Intel Corporation (INTC) is truly one of the world’s technology powerhouses; the company is by far the largest computer chip maker in the world, explains industry-leading income expert Tom Hutchinson, editor of Cabot Dividend Investor.
The firm holds an astounding 80% market share of microprocessors that go into personal computers (PCs) and computer servers. It has over $70 billion in annual revenues and $264 billion in market capitalization.
In plain English, Intel makes the brains that operate computers. These processors are the cutting edge of computer technology and the digital revolution and determine the power, speed and function of a computer.
Naturally, competition is fierce. Many players try to take market share. It’s a tribute to Intel’s high R&D commitment and funding that the company maintains such market dominance.
Over the last decade, Intel missed the smartphone and mobile device revolution, but it it made up for it with rapid growth in the server market as the expansion of cloud computing necessitated a data center infrastructure buildout. Now, servers account for about half of Intel’s chip sales.
The expansion of technology was a tailwind that will likely get even stronger going forward. In fact, the company sees a $300 billion per year addressable market in the following areas:
- 5G
- Data centers
- Internet of things
- Artificial intelligence
- Self-driving cars
Every area presents individual opportunities. For example, Intel has made a string of strategic acquisitions to gain an advantage in artificial intelligence and self-driving technology (including Altera, Mobileye, Nervana and Movidius). It’s now at the forefront of these high-growth technologies.
Intel could absolutely knock the cover off the ball in these areas. Or maybe it won’t. I don’t really know. But either way Intel is sitting pretty because data centers and servers will have to be increased to accommodate the new technology. And Intel is already king in the server and infrastructure arena.
While second quarter earnings were in line with expectations, the company reduced 2019 guidance. The main problem as far as Intel is concerned is slower demand in the all-important data center market (accounts for half of the firm’s revenues and most of its growth) as it’s still digesting recent expansions.
These things are temporary. There will be good and bad quarters. Growth occurs in fits and starts. But Intel is uniquely positioned to benefit as technology inevitably expands. This is a great entry point for the stock which should recover fairly quickly.
