Intel Leads Blue Chip Rally

The recovery in equities continued on Thursday as the Dow Jones Industrial Index soared and was up more than 400 points at one stage. As economies around the world and within the US continue to reopen while authorities scale back restrictions, investors haven’t been slow about flooding back into stocks. The S&P 500 and NASDAQ 100 indices have both now broken out of the trading ranges of the past month to fresh post-crash-highs. With their tech heavy components leading the way, it’s understandable that the Dow with its industrial heavy names is lagging their performance. However, the Dow is working hard to catch up with them and the likes of Intel (NASDAQ: INTC) are doing everything they can to make sure the blue-chip index isn’t left behind.

And when you take a look at the chip-making giant, it’s easy to see why they’re leading the index.

Intel shares were up close to 5% during Wednesday’s session and by the close had logged an impressive 12% rally in less than a week. This means that after a 37% collapse in the share price from their January high through the lows of March, the stock has bounced 45% in two months. Not bad for a $260 billion behemoth.

Acquisition

The big driver in Intel’s stock yesterday came from the news of their acquisition of Rivet Networks. These guys are known for making the Killer-branded network interface cards that are essential components in laptops from the likes of Dell, HP, and others. Their networking products are also popular in the gaming tech market for minimizing latency, or lag, and supporting connections.

Without getting too into the weeds, suffice to say that Rivet Networks have been a competitor of Intel’s for years and with this acquisition, the road is clear for Intel to start capturing more market share in the gaming market. 

Many are viewing this as Intel making a move to reclaim territory lost to AMD (NASDAQ: AMD) since the latter’s launch of their Ryzen processor in 2017. It carries on from their Core i9-10900K product which was released at the end of last month and lauded as the fastest gaming processor ever. These are all promising signs of innovation and investment that will bear fruit. The company’s internal revenue engine is solid even after having a bit of a wobble from coronavirus driven uncertainty.

Strong Internals

In their Q1 earnings released last month, both EPS and revenue beat expectations with the latter posting a 23% jump year on year. The data center and PC-centric businesses led the way in revenue generation, with the former up 43% year on year and the latter up 14% over the same period. In a pragmatic move, management suspended their share buyback program to conserve cash and took on an additional $10.3 billion in debt to secure their liquidity needs as they ride out the COVID-19 storm.

Even though management held off on offering forward guidance in the face of such uncertainty, analysts were quick to note that their Q1 results marked the second straight quarter of accelerating earnings and sales. On top of that, it was the company’s fastest earnings growth in more than 7 years.

Getting Involved

For investors who were brave enough to step in and buy when the stock was trading near $44, congratulations. For those who weren’t or who are only seeing the potential in Intel now, welcome to the party. This is a 52-year-old tech company that’s been through it all and based on its performance in recent weeks, knows exactly what it’s doing.

Sure, it would have been nice if we could all have picked the bottom, but with the stock starting to make a run for it’s pre-coronavirus all-time highs, you wouldn’t bet about it printing fresh numbers in the weeks ahead.