The lion’s share of stock market attention has centered around the technology sector, particularly with stocks exposed to the artificial intelligence race in its breakthroughs and adoption across the global economy. However, not all stocks are equal in that race; some have gotten more attention and capital, especially in the first half of 2024.

The first name that should come to mind for investors following this trend is NVIDIA Co. (NASDAQ: NVDA). The chip maker has been the second-best performing stock of 2024, winning the hearts of institutions and retail investors with a net rally of 158%. While those at the top are celebrating the incredible run their investment has had in this stock, others are wondering whether others in the space will see similar price action.

Answering that question may be more complex. Still, markers are backing a thesis for other chip makers inside the VanEck Semiconductor ETF (NASDAQ: SMH), such as Intel Co. (NASDAQ: INTC) and even Micron Technology Inc. (NASDAQ: MU). However, focusing on Intel over Micron might be best for those looking into a better risk-to-reward ratio. Here’s why.

Intel Stock Has the Faith and Credit of the U.S. Government

That’s a bold statement, but it’s true. In the first quarter of 2024, the U.S. government granted up to $20 billion in additional capital for Intel, though there is one string attached. This capital will be used to build semiconductor and chip factories inside the United States. Intel has chosen Ohio and Arizona as its locations.

Why that matters is another subject, but here’s the concept in a nutshell: As tensions between the U.S. and China rise, particularly around technological advancements and embargoes, it makes sense to start onshoring some of the supply chain and intellectual property for protection’s sake.

More than that, the world saw what it was like to rely on an intensely concentrated supply chain, as the COVID-19 pandemic brought on shortages in virtually every product that relied on chips (which turns out to be a lot of them). So, to avoid further delays and second-hand impact on prices, the U.S. is sponsoring the best of the best to get the job done, Intel among them.

On the other hand, some are willing to bet on China’s advance in this race, such as Micron. Wall Street analysts now forecast up to 1,408% earnings per share (EPS) growth for the company. However, that could be a wild punt guesstimating the release of China’s ban on Micron chips, hence the better risk to reward in Intel.

Because Intel holds roughly 64% of the x86 processor market and has shown loyalty to the U.S.’s positioning in the global arena, it earned that $20 billion. However, the market has only now started catching up to this fact. Intel stock is down over 30% yearly, with a 17% rally in the past couple of weeks.

Wall Street's New Outlook on Intel Stock

It hasn’t happened yet, but analysts will likely start upgrading Intel stock, especially after its new double-digit rally shows more market interest. Intel stock trades at only 67% of its 52-week high, compared to Advanced Micro Devices Inc. (NASDAQ: AMD) and its 82% of 52-week high prices, or Micron’s 86%.

Typically, analysts won’t stick their necks out to boost a company’s price target if the stock is underperforming like Intel is, no matter how bullish the underlying fundamentals may be. Investors should remember that in 2021, when the pandemic was in full swing and even before government grants, Intel’s price target was over $60 a share.

Despite much-improved fundamentals today, the consensus price target is only $39.6 a share, a mere 15.5% upside from where the stock trades today. Some on Wall Street, however, have recognized that Intel’s future is brighter than it may seem today, as the EPS growth forecast has been bumped to over 886% for the next 12 months.

That growth in EPS, which typically drives stock prices, should be enough to justify a valuation boost. Still, that likely won’t happen until Intel stock starts performing on par with its peers. While this bearish price action may worry some in the market, it also poses an opportunity to ‘catch up’ for those savvy and patient enough.

Intel Stock: Discounted Valuations Suggest Greater Upside

Apart from price action, there are other metrics that investors can look at today to determine just how much upside there could be within Intel stock. Valuation multiples can open up a different view for investors, and Intel is a perfect example of a discounted stock.

On a forward P/E basis, Intel trades at 18.6x today, a discount of 54% to NVIDIA’s 39.9x valuation. With Broadcom Inc. (NASDAQ: AVGO) trading at a 29.3x multiple, Intel stock is also showing a discount of 36.4%. But that’s not all; Intel also shows discounts on a price-to-book (P/B) multiple.

Compared to the rest of the computer sector, which trades at an average P/B ratio of 6.8x, Intel’s 1.3x valuation allows investors to project much more upside than current price targets.