Intel (NASDAQ:INTC) stock is a street urchin compared to Nvidia (NASDAQ:NVDA). Intel carries a market cap of about $130 billion. Nvidia is worth $2.97 trillion, over 22 times more.
Huang’s Law, named for CEO Jensen Huang, holds that graphics processing units can improve compute speeds 2.5 times faster than Moore’s Law. It’s Huang’s Law that could make artificial general intelligence a reality by the end of the decade. But there’s a price to be paid.
NVDA Looks Hot
Nvidia’s super-chips, like the GH200 or Grace Hopper, claim great energy efficiency. But the level of computing they deliver means they still draw 700 watts of power. Next year’s Blackwell chip will draw even more. By way of comparison, the Intel chip in your laptop uses 30-70 watts.
Nvidia brags that a single Hopper is energy efficient. But a million Hoppers are an energy nightmare, and Nvidia will sell 3.75 million Hopper chips this year.
The bottom line here is that the world’s energy systems can’t deal with the cloud-based AI future Nvidia chips are drawing up for us. It will take years of growth in solar power, wind power, in other alternatives, and in batteries for that to be possible.
Moore’s Law, governing chip efficiency, is balanced by Moore’s Second Law, holding that costs increase as circuit lines get closer. Energy is Huang’s Second Law.
The Return of Moore
The near term future belongs to the clients.
Intel still has 80% of the PC market. How much it can hold with ARM Holdings (NASDAQ:ARM) bringing Nvidia and Qualcomm (NASDAQ:QCOM) to the party (among others) is a question. But it’s still a substantial amount.
If we are moving into a client stage of AI, Intel is in a good position.
But if that were my only argument for Intel, it would be a weak one. Intel is selling at 33 times last year’s earnings, and its dividend yields just 1.6%. The fact that the dividend was cut last year also makes me uncomfortable.
The long term argument for Intel is based on Nvidia, which doesn’t fabricate its own chips.
Taiwan Semiconductor (NYSE:TSM), Nvidia’s preferred supplier, is tapped out. So Nvidia is turning to Intel. By the time Intel’s Ohio fabrication plant is ready, Intel could be a primary supplier to Nvidia.
Intel’s past problems in chip design have made it the forgotten man of the chip industry. But Ohio will be its third major chip plant in the U.S. There are also Intel fans in Ireland and in Israel.
All this is taking a capital budget of $24 billion per year, and rising. The $8.5 billion Intel is getting through the CHIPS Act is just a small piece of it.
Intel is also turning to private equity, selling almost half its Ireland expansion to Apollo Global Management (NYSE:APO) for $11 billion. Intel also has about $48 billion of debt on its books.
Still, a lot of smart money is going into Intel.
The Bottom Line on Intel Stock
I’m not telling you to rush out and sell Nvidia to buy Intel stock.
But I do think you should own some Intel stock. I’ve said that before, and I was wrong to say it. (I have a bad habit of getting to a party early.) But while the turnaround is taking longer than I expected, it is happening.
Investors who make the big bucks buy when stocks are low and sell when stocks are high. Nvidia is on a high right now, Intel is low.
As of this writing, Dana Blankenhorn had a LONG position in NVDA, INTC, and TSM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his free Substack newsletter.