New Nvidia Price Target After $5 Billion Intel Deal Turns Heads
Price target moves for the AI giant and the beleaguered chip marker, as well as thoughts on a key competitor.
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Early on Thursday morning, Nvidia NVDA and Intel INTC announced a landmark deal to co-develop both PC and data-center type chips. Nvidia also announced a $5 billion investment in Intel at $23.28 per share, pending regulatory approvals.
In response, I see INTC trading almost 30% higher (yes, I recently sold INTC. Thanks for reminding me), and NVDA is trading almost 3% higher. Advanced Micro Devices AMD, which competes with Intel at the PC level and Nvidia at the AI/data center level, is down more than 4% ahead of the opening bell. This deal comes after the U.S. government decided to take a 10% stake in Intel and take a 15% share of Chinese-driven revenue for both Nvidia and AMD.
According to what we think we know, Intel will manufacture Nvidia's custom x86 CPUs and x86 SoCs, which will integrate with Nvidia RTX GPUs for PCs. For those who just asked, CPUs are core processors, while SoCs are complete systems on a single chip. SoCs are more suitable for desktops than for mobile devices due to the elevated level of power required to run the system. Most readers probably already know that a GPU is a specialized process optimized for graphics rendering.
The CEOs
Nvidia's Jensen Huang said, “AI is powering a new industrial revolution and reinventing every layer of the computing stack — from silicon to systems to software. At the heart of this reinvention is NVIDIA’s CUDA architecture. This historic collaboration tightly couples NVIDIA’s AI and accelerated computing stack with Intel’s CPUs and the vast x86 ecosystem — a fusion of two world-class platforms. Together, we will expand our ecosystems and lay the foundation for the next era of computing.”
Intel's Lip-Bu Tan commented, “Intel’s x86 architecture has been foundational to modern computing for decades — and we are innovating across our portfolio to enable the workloads of the future. Intel’s leading data center and client computing platforms, combined with our process technology, manufacturing and advanced packaging capabilities, will complement NVIDIA’s AI and accelerated computing leadership to enable new breakthroughs for the industry.”
There will be a joint press conference at 1 p.m. ET on Thursday afternoon.
Technically Speaking...
Ever hear of a double-bottom pattern of bullish reversal? How about a nine-bottom pattern of bullish reversal?
All kidding aside, INTC is breaking out of a more than 12-month long flat base on Thursday morning with a $27.55 pivot. If I were still long, my target would be the half-way back point ($34.20) or 50% retracement of the December 2023 through April 2025 sell-off. If I were long, I would take some profits there.
Being flat, I will not be initiating a new position short of that mark, but on a take and hold, I might. Check my notes on pivot points from Thursday morning's Market Recon to understand why.
Nvidia had been forming a double-top pattern of bearish reversal since late July. Thursday morning's surge disrupts that pattern and negates any downside target by retaking its 50-day SMA. That will re-engage the institutional crowd. Additionally, Thursday morning's action will likely push all three components of the daily MACD back into bullish territory and may nudge relative strength back above a "neutral" reading. The new pivot is that 50-day line at $175, which places my new target price at $202, down from $212.
Readers will see that AMD had been breaking out of a falling wedge pattern which is a pattern of bullish reversal. The bad news is that this sell-off will negate that move. The good news is that this move, if it finds support around the $149/$150-ish level, will set up a double bottom, which is also a pattern of bullish reversal. Of course, recovery will not be quick as the daily MCD is already bearish and Thursday's price discovery will not help.
The new pivot is the 50-day SMA at $164. That takes my target price all the way down to $188 from $209.
More Thoughts...
- Intel is more of a short (for a trade, not as an investment) as the share price approaches $34
- Nvidia is a buy as it takes back its 50-day SMA
- AMD is only a buy on weakness if support shows up where I said it needs to be
At the time of publication, Guilfoyle was long NVDA and AMD equity.
