Intel stock price forecast: INTC slowly forms rising wedge

Intel (NASDAQ: INTC) stock price has staged a strong recovery this year as investors predict more demand for semiconductors in the near term. The shares jumped to a high of $38.83 on Friday, the highest level since July last year. They have soared by 58% from the lowest level this year.

Time to be cautious about Intel

Semiconductor stocks have done well this year, helped by the rising demand of chips as artificial intelligence goes mainstream. As a result, the biggest ETFs in the industry like the iShares Semiconductor ETF (SOXX) and VanEck Semiconductor Fund (SMH) have risen by over 50% this year.

Most of this growth has been driven by Nvidia, the biggest GPU manufacturer in the world valued at over $1 trillion. Other well-known semi companies like Intel, AMD, and Taiwan Semiconductor have also done well. They have also been boosted by the upcoming Arm IPO in the US that could value the company at over $50 billion.

Intel stock price has been boosted by the ongoing optimism among Wall Street analysts. Data by Yahoo Finance shows that  36 of the 41 analysts covering the stock have a hold, buy, or strong buy rating. The rest have a sell and underperform rating.

Still, I take a contrarian view about the Intel stock price. First, Intel’s business is still slowing, as evidenced by its second-quarter results. These results revealed that the company’s revenue dropped by more than 12% YoY to $12.95 billion. 

The average revenue estimate for its total revenue this year will be $52.45 billion, down from the previous $63 billion. Therefore, Intel’s business is not growing that fast even as the demand for AI products rise.

Second, Intel seems like a highly overvalued company. Data shows that it has a forward PE ratio of 21.60, higher than the S&P 5OO average of 19.80. The company needs to demonstrate faster growth to justify this valuation.

Semiconductor oversupply

The other case against Intel stock price is that the semiconductor business is going through major changes. For one, many countries are coming up with plans to dominate the industry.

Intel has been the most prominent firm in this trend. It is investing over $43.5 billion in several American states to take advantage of the CHIPs Act, Intel hopes to become a leading player in the foundry business, where it will manufacture chips for other companies.

Intel is also investing over 30 billion in Germany, the biggest European economy. Like in the US, the company is taking advantage of subsidies by the government. The implication of all this is that we could see an oversupply or overcapacity in the coming years.

Most importantly, Intel has a long track record of missing timelines. For example, it delayed its 7nm and 10nm chips several times, leading to a market share loss from AMD.

Intel stock price technical analysis

My last forecast of Intel was accurate. In April, I wrote that the shares would jump by another 26% to $40.

The daily chart shows that the INTC stock price has been in a strong bullish trend in the past few months. Along the way, the stock formed a golden cross pattern on June 16th when the 50-day and 200-day moving averages made a bullish crossover. In most cases, this cross is one of the most accurate bullish signs.

However, the stock has also formed a rising wedge pattern, which is shown in green. The rising wedge is not close to its confluence pattern, meaning that it could continue rising in the coming months. In the long term, however, the shares will likely retreat and retest the support at $30.