Tiger Global Added to Its Position in Intel in Q2

Tiger Global Management actively made adjustments to its portfolio in the second quarter, adding to stocks like Cerebras Systems (CBRS) and Applied Digital (APLD) while exiting others such as Zscaler (ZS). However, Tiger Global made a particularly intriguing move with its Intel (INTC) stake during the quarter.

Specifically, Tiger Global added some 2.6 million new shares to its Intel holdings. This increased its total stake to approximately 4.25 million shares worth roughly $593 million as of June 30, per the most recent 13F filing. Such an increase is particularly relevant at a time when Intel is trying to realign its focus toward growing AI compute demand, improved manufacturing execution, and its foundry business.

This is also especially important to note as Intel's performance has improved meaningfully. Specifically, revenue grew 25% year-over-year (YOY to $16.1 billion in Q2, while its Data Center and AI (DCAI) business grew even faster. However, after a strong run in Intel stock over the past year, the question remains: Can improving fundamentals continue to support the rather demanding valuation of INTC stock?

About Intel Stock

Based in Santa Clara, California, Intel is one of the biggest semiconductor firms in the world. The firm designs various processors and other computer parts, and has been developing an increasingly crucial semiconductor manufacturing and foundry business. The market capitalization of Intel stands at approximately $468 billion.

Currently, INTC stock trades at approximately $91, representing a drop of about 36% from its 52-week high of $142.35. However, such a decline does not paint the entire picture. Shares still trade nearly 300% above the 52-week low of $22.77, suggesting that investor sentiment has shifted dramatically.

Such an impressive recovery in the stock price has made Intel more expensive. INTC stock now trades at approximately 102.9 times forward earnings and 9.2 times sales. These multiples are high for a semiconductor company still in the middle of manufacturing expansion, especially considering that its return on equity (ROE) stands at only 2.62%.

In other words, the market already expects significant improvement in the future performance of the company. Tiger Global's increased stake is noteworthy, but at such a valuation, Intel will likely need further growth and improving margins to back up expectations.

Intel Beats on Earnings Thanks to Growing AI Demand

Intel reported Q2 revenue of $16.1 billion on July 23, marking 25% YOY growth and the company's strongest revenue growth in more than 15 years. Non-GAAP EPS came in at $0.42 compared with a loss of $0.10 per share a year ago.

The improvement was especially pronounced in Intel's DCAI segment, which grew 59% YOY to $6.3 billion. Client Computing and Physical AI revenue increased 13% to $8.9 billion, while Intel Foundry revenue increased 31% YOY to $5.8 billion.

Moreover, margins improved meaningfully. Non-GAAP gross margin came in at 41.8% compared with 29.7% a year ago. Non-GAAP operating margin grew to 17.2% from -3.9%. Intel generated $7 billion in cash flow from operations during the quarter.

Management expects the momentum to be maintained in Q3, with the company forecasting revenue between $15.8 billion and $16.8 billion. The company also expects non-GAAP EPS of $0.38 and non-GAAP gross margin of 42%.

Intel has been investing to support growing AI demand. The company recently introduced its next-generation Xeon 6+ data-center processor based on Intel 18A. The company also started risk production of Intel Foundry's 18A-P process. Moreover, in the Q2 report, Intel noted that a subset of its Panther Lake processors has entered high-volume manufacturing with the help of ASML's (ASML) High NA EUV technology.

At the same time, Intel has been expanding its exposure to AI infrastructure outside its traditional CPU business. The company has announced collaborations with companies such as Foxconn (FITGF), Siemens (SMEGF), Hitachi (HTHIF), Fortinet (FTNT), and others. More than 130 customers have also adopted or tested its processors for edge AI and robotics applications.

All told, the combination of accelerating DCAI revenue growth, manufacturing execution, and increased investments in AI helps explain the reassessment of Intel's opportunity by institutional investors like Tiger Global.

What Do Analysts Expect From Intel Stock?

Overall, analysts have a consensus “Hold” rating on Intel stock with price targets ranging from $75 to $200. The average price target stands at $113.87, implying potential upside of approximately 27% from current levels. Meanwhile, the Street-high target of $200 implies potential upside of 122% in case Intel's turnaround proves to be faster than expected.