Reportedly, Intel Corp (INTC - Free Report) has inked a deal with Delphi Automotive PLC (DLPH - Free Report) to supply it with highly efficient computer processors for its future self-driving vehicle systems. Initially, Delphi would be using Intel’s Core i7 chip and later on upgrade to an even faster processor that is to be launched by Intel in a few weeks time.
What this Means for Intel?
In today’s world, automobiles are becoming more and more complex with the use of processors and chips that control brakes, transmission, navigation and power windows. Hence, it is no surprise that they are often dubbed as computers on wheels. With this partnership, Intel will be able to gain market share in the rapidly growing segment of automotive chips.
Intel is gradually shifting its focus on developing self-driving technology for cars. The company announced earlier this month that it is on track to invest more than $250 million over the next two years to develop fully autonomous driving technology. (Read More: Intel to Invest $250M in Self-Driving Technology for Cars)
As per a Boston Consulting Group report, the self-driving vehicle market is estimated to reach $42 billion by 2025, which augurs well for Intel in the long run. We note that there is stiff competition in the automotive chip business with the presence of the likes of NVIDIA Corp. (NVDA - Free Report) and QUALCOMM Inc (QCOM - Free Report) . However, Intel’s strategy to address the mass market by offering less expensive cars the capability to drive on their own could prove to be a game changer for the company.
We note that Intel’s stock price has underperformed the broader Zacks Semi-General Industry over the last one year. While the stock generated a return of 3.08%, the sector gave a return of 25.92%.
The underperformance of the stock could be attributed to revenue concentration, declining PC demand, and a failed mobile initiative. However, growing demand for data centers, and favorable macro factors such as the cloud remain future growth drivers for the company. Also, Intel’s investments in IoT, security and memory could pay off this year.
At present, Intel carries a Zacks Rank #3 (Hold). NVIDIA with a Zacks Rank #1 (Strong Buy) is a better-ranked stock in the sector. You can see the complete list of today’s Zacks #1 Rank stocks here.
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