NVIDIA and SMCI create controversy: Intel, Qualcomm, Micron shine

The Technology field has been the focus of attention lately, with a particular focus on the semiconductor industry and its biggest stories. Of all the businesses centered in this space, two have garnered the most attention today, for both good and bad reasons.

NVIDIA Co. NASDAQ: NVDA has been loved artificial intelligence And semiconductors for more than a year now, but around the recent allegations and speculation Super Microcomputer Inc. NASDAQ: SMCI have created some tailwinds that investors will now have to weigh and deal with to protect their capital in the coming quarters. As the problems surrounding the super microcomputer stock are soon resolved, NVIDIA may be out of the woods.

But there’s also a chance that the stock faces a significant drop if the news isn’t favorable, so investors should have a backup plan to ride the next wave in semiconductors and artificial intelligence. Knowing this, it will be useful to consider such names Intel Co. NASDAQ: INTC and its potential purchasers, Qualcomm Inc. NASDAQ: QCOM. Apart from this, there is a significant discount in the shares Micron Technology Inc. NASDAQ: MU For investors to consider.

Why does Qualcomm acquiring Intel make sense today?

There The news was circulating around the market that Qualcomm c Trying to make a merger bid For Intel. At today’s market capitalization of $103.4 billion, the transaction would make it the largest takeover in Wall Street history. of course, There are many other implications that make this a no-brainer for Qualcomm.

Starting with the fundamentals, the new administration in the United States is looking to revive the manufacturing sector, which means increasing the pace at which Intel will need to expand its domestic manufacturing footprint. Factories for semiconductors in Ohio and Arizona are actively being built for Intel chip production, and this is a tailwind for Qualcomm.

When new trade and tariff policies come into play in the economy, it will be names like Intel that can continue to drive job creation in the sector, and it should be worth more to the market at 0.8x today’s low price. Book (P/B) valuation. Now, here is the quantitative side of the story that encourages Qualcomm to buy Intel.

Qualcomm today trades at a forward P/E ratio of 22.5x, commanding a premium of more than 77% compared to Intel’s valuation of just 12.7x forward P/E. Not only does that make it an acquisition target, but it’s also a relatively inexpensive way for Qualcomm to buy into the potential growth that Intel stock could bring once the merger is complete.

According to Wall Street analysts, Intel’s earnings per share (EPS) can be set Just over $0.20That would be a significant jump from today’s net loss of $0.46 per share. Now, given that Qualcomm is only set to grow its earnings by a relatively flat amount over the next 12 months.

In this way, acquiring Intel would allow Qualcomm to tap into more growth potential at a relatively low cost, but that’s not all. From today’s $100 billion valuation, Intel could still deliver double-digit growth, according to some Wall Street analysts.

For example, the consensus price target for Intel stock is set today At $30.1 per shareThat would require the company to rally up to 25.9% from where it trades today. Here’s why it’s important to keep track of analyst goals in the middle of a potential merger.

If the consensus price target is set at $30.1 per share, Qualcomm would have to make a more attractive offer above what analysts are already recommending the stock should be worth. In this case, investors are facing a potential rally that is relatively low risk compared to all the issues with NVIDIA and Super Microcomputer.

Intel isn’t the only semiconductor deal, there’s Micron

Trade on 62% of its 52-week high Today, Micron Technology stock offers investors a similar discount to that seen in Intel stock, but other metrics are also important in this potential deal. Looking at Micron’s valuation metrics, a forward P/E ratio of 7.8x would send it at a more than 38% discount to the rest of the industry’s 12.8x average valuation.

Then there’s Wall Street opinion on Micron stock today, which has a consensus Price target of $143 per share. To justify the consensus view, Micron would have to rally to 47% of where it trades today, significantly shifting the risk-to-reward scale in favor of the bulls and away from potential risks in NVIDIA and Super Microcomputer. to do .

Ultimately, the deal will come from institutional buying activity from the likes of State Street, which has increased its holdings in Micron stock to 3.1% through November 2024. After this new division, the group until now $5 billion has been invested in Micronor 4.3% ownership in the company, to show for these exemptions.

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