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45
Target Price: $53.76
Shares Outstanding: 4.68
Billion
Market Cap: $203.82 Billion
Forward P/E: 13.79
52 Week Range: $33.23- $47.30
Beta: 1.25
BUY
Deepan Islam
COMPANY OVERVIEW
• Includes platforms designed for Internet of Things market segments, including retail,
transportation, industrial, video, buildings and smart cities, along with a broad range
of other market segments.
NON-VOLATILE MEMORY SOLUTIONS
GROUP
• Includes NAND flash memory products primarily used in solid-state drives.
INTEL SECURITY GROUP
1%
6% 3% Revenue: $16.1 Billion
Expected Revenue: $15.73 Billion
5% EPS: $1.01 vs expected of $0.80
Client Computing Group
Data Center Group DCG: 7% YOY
55%
30%
Internet of Things Group
IOT: 23% YOY
Nonvolatile Memory Group
Intel Security Group
NVMG: 32% YOY
Programmable Solutions Group CCG: 1% YOY
All Other PSG: 10% YOY
MULTIPLES
MULTIPLES CONT.
• In 2016, Intel stock gained 10.5% versus Nvidia’s 234% and AMD’s 309%.
• Nothing too outstanding was happening with Intel, and the market priced this in via
its relative valuation
• The multiples do not account for Intel’s investment in several growth
opportunities including IOT, AI and autonomous vehicles.
COST-REDUCTION INITIATIVES
• Bob Swan, CFO of Intel announced the company’s intent to control costs and focus
investment on highest growth opportunities.
• New discipline on how Intel does deals: try to grow organically. Intel has already
acquired all the parts it needs to put up a strong fight on the AI, ML, and IOT fields.
• Already reduced MG&A costs by over 100 million in 3Q 2017.
NEW PRODUCT RELEASES
• Intel is introducing its x86 chips in 2018, generation name: Cannonlake, which will be a 10
nm Skylake chip. Transition from 14 nm to 10 nm will help widen the performance gap
between Intel and AMD. These chips have more cache memory per core.
• Intel is the market leader in CPUs and though Ryzen posed a threat, Intel quickly
countered with Coffee Lake, which offers better performance than Ryzen for a slightly
higher price.
• The PC market is forecasted to grow next year instead of slumping as it has been. China
will be a growth driver since Microsoft resolved its issues with the Chinese government
regarding its software. PC shipments should ramp up.
NEW PRODUCT RELEASES
• 5G Technology is coming out, and Intel has been working with Apple to produce a 5G
modem for the Iphone.
• Apple has previously worked with Qualcomm but due to a patent dispute, Apple is
dropping the use of their modems.
• Intel chips showed up in the Iphone 7-8. Signs point toward Apple moving away from
QC completely.
ARTIFICIAL INTELLIGENCE
• Intel is designing its Nervana Neural Network processor, which will surpass any
general CPU for specific machine learning and AI applications.
• Training neural networks requires massive amounts of memory and arithmetic
operations.
• These chips will further solidify Intel’s strength in the AI and Data Processing fields.
• Additionally, applications of AI to autonomous vehicles, for example, will create
growth prospects for Intel in the AI space.
• AI market is expected to hit $50 billion by 2020.
AUTONOMOUS VEHICLES
• Intel-Mobileye Acquisition: Will help penetrate the $70 billion market.
• The acquisition of MobilEye now enables Intel to offer almost anything related to self-
driving vehicles - cameras, in-car networking, sensor-chips, roadway mapping, cloud
software, machine learning and data management.
• Management noted that in 2017, Mobileye has won 14 ADAS designs across 14
automakers, better than the 12 wins the company recorded in 2016.
• Intel has supplied Google’s Waymo self-driving car unit. Additionally, Intel will now be
supplying the chips powering the infotainment systems in Tesla Model 3s and new
versions of other cars.
• Formed partnerships with Fiat Chrysler and BMW. Intends to bring fully-automated
driving platforms into production by 2020.
• Audi announced that they are using Intel’s Cyclone V FPGA for its Level 3 Autonomous
driving system in the upcoming Audi A8.
IOT
• Intel has partnered with Movidious to produce computer vision chips, which are
already used in various UAVs and cameras.
• Intel launched its Movidius Myriad X, the world's first vision processing unit with a
dedicated neural compute engine to deliver AI capabilities to the edge in a low-
power, high-performance package. The company also delivered a 17-qubit
superconducting test chip for quantum computing to its research partner, QuTech in
the quarter.
• Further application of these computer vision chips to surveillance systems,
wearables, drones etc.
DATA CENTERS
• Intel controls 99% of the Data Center Market.
• NVIDIA has established a foothold in this segment by providing high-performance
GPUs.
• However, Intel introduced its Knight Mill Xeon Phi chips that are designed for deep
learning.
• Acquisition of Altera will help it produce FPGAs that will cement its leading position
in the data center space.
• Microsoft is deploying Intel FPGAs to supplement its cloud network. The company
announced that it would use Intel’s 14-nm Stratix 10 FPGAs for its accelerated deep-
learning platform (Project Brainwave).
• Alibaba also uses Intel FGPAs in its cloud.
MEMORY
CORE AND VISUAL COMPUTING GROUP
• Intel poached Raja Koduri, ex-head of graphics at AMD, who will start this
December.
• Intel and AMD will work together in order to bring a new Core chip to the market
with AMD Radeon discrete graphics inside. The new product will be based on the
technology called Embedded Multi-Die Interconnect Bridge (EMIB) and will be
part of Intel's eighth Gen Intel Core family.
• Will develop a chip (integrated graphics unit) as well as a separate discrete
graphics card.
• Aimed at the portable PC market and potentially at the portable PC gaming
market as well.
CORE AND VISUAL COMPUTING GROUP
• Intel’s graphic division is a laggard compared to that of Nvidia and AMD.
• This can further solidify Intel’s gains in the Parallel Computing Field.
• Pure speculation: this venture with AMD could expand with Intel making server-
level GPU’s to complement its FPGAS and Xeon Phi processors.
• GPU’s are primarily used in gaming and high-processing computing but GPUs will
see increased use in this era of connected devices.
• I.e. vision based devices such as drones send what it sees from its aerial
photographic unit to a specific datacenter. The image will be analyzed via GPU
and CUDA platform.