We recently compiled a list of the Jim Cramer’s Top 12 Must-Watch Stocks. In this article, we are going to take a look at where Intel Corporation (NASDAQ:INTC) stands against Jim Cramer’s other must-watch stocks.
In a recent episode of Mad Money, Jim Cramer traveled to Dreamforce to understand the true capabilities of artificial intelligence (AI) and to separate fact from hype. After diving deep into the topic, he feels more equipped to identify which AI claims are genuine and which are simply marketing fluff. He noted that there seems to be far more misleading information than real advancements.
“All right, I had to come all the way out here to Dreamforce, the Salesforce Tech Festival, to learn what artificial intelligence is really capable of and what’s pure hype. After immersing myself in AI, I feel a lot more confident in sorting out the real from the phony. And you know what? There’s a hell of a lot more phony than there is real. That’s why I want to show you which AI claims are meaningless and which ones are legit.
Look, I know this is Mad Money, not Mad AI. On a day like today, I could just focus on the Fed and only the Fed, whether we’ll get a quarter percent rate hike or maybe a half percent rate tomorrow. Today, the averages whipped around, finishing off 16 points, the S&P ending up 0.3%, and the NASDAQ inching up 2%. Stocks were all over the place.”
Maximizing Profit Potential Through Lower Rates and AI Innovation
Cramer emphasized that we don’t need expert predictions to see that interest rates are likely to drop, which is crucial for sustaining a bull market. He urged viewers not to overthink the situation and instead focus on promising opportunities, especially in the rapidly growing field of artificial intelligence.
“Today is proof that you can game the ungameable. But you don’t need a San Francisco weatherman to know which way the wind blows. In the end, we know rates are headed lower, not higher, and that’s what we need to sustain this bull market. Please do not overthink it. I’d rather focus on what can help us make some money, like the biggest theme in the world right now: artificial intelligence.”
While AI is causing excitement in the stock market, Cramer observed that its impact on the overall economy has been minimal so far. Some applications, like cost savings in corporate back offices, exist, but they aren’t groundbreaking. This lack of significant progress has led many analysts to suggest that the hype around AI may be turning into a bubble.
“Specifically, what does AI actually do? We’ve heard so much about this technology and how it’s going to revolutionize everything. Right now, though, we know that while AI has taken the stock market by storm, it really hasn’t taken the actual economy by storm. There are use cases, sure, back office corporate cost savings—nothing flashy. That’s why so many commentators now come on air and call the whole thing a bubble.”
Cramer explained that AI, particularly when paired with advanced computing from chip giants, can greatly enhance efficiency by allowing machines to perform tasks intelligently, similar to skilled humans. He pointed out that businesses strive to produce quality products, but a worker shortage, exacerbated by the COVID pandemic, has hindered their ability to connect with customers effectively. Sales associates often end up rushed and confused, which affects the customer experience.
“Let me tell you what AI really does. When coupled with accelerated computing, AI makes everything go faster. It rationalizes processes and can make machines behave like smart, good humans. Businesses want to produce good products and sell them to real people, whether for enterprises or homes—that’s capitalism 101. But right now, we don’t have enough workers to do it.
That became apparent during COVID. We can’t interact effectively because our sales associates are too busy to be anything but brisk or confused. They’re harried from the moment they come in to the moment they leave. It’s a late-stage capitalist directive. What can I say? What doctor has time to talk to you? What nurse practitioner can give you the time of day?”
Elevating Customer Service Through Advanced AI Agents
Cramer highlighted that companies are pushing their employees hard for profits, creating a stressful work environment. However, after attending Marc Benioff’s keynote, Cramer recognized the potential of a technology called Agent Force. This AI initiative can engage customers in a friendly manner, using personalized data to answer common questions efficiently.
Cramer believes AI is a great solution for customer service, offering clear assistance without the frustrations that often come from overwhelmed human employees. AI agents can listen, reason, and either direct customers appropriately or handle their inquiries independently.
“Companies are already squeezing as much as they can out of their employees to boost stock prices and profits for executives. Then it hit me while watching Marc Benioff’s incredible keynote today. He described an initiative called Agent Force, and I realized what this technology can really do. It has time for you, acknowledges you, and is polite. It can almost always answer your questions because there are only so many that get asked regularly, and it has the data to respond to your data. It knows your preferences.
This is the perfect way to handle customer interactions instead of relying on humans who can be unclear, impatient, or exhausted. Humans are, well, human, harried and ready to go home. But machines infused with AI are delightful, smart, and engaging. They don’t mind going to work, and that’s where these AI agents come in. The machines can listen, reason, and either direct you to the right place or handle everything themselves.”
He further explained that AI enhances customer experiences by remembering preferences, helping with returns, and suggesting alternatives based on past purchases. This reduces the need for interaction with human salespeople who may be stressed or impatient. If customers remain unsatisfied, they still have the option to speak to a human, but many might prefer friendly interaction with an AI agent.
“So, what AI really is and what it does is provide us with something better than what we currently have. It’s a retailer that knows all about your preferences, can help you return an item, and asks if you want something different from what you bought last time. It frees you from the hassle of a human salesperson who might be frustrated or upset. And if you’re not satisfied, you can still speak to a human if you want to, but I doubt you will, because the AI agent is just so much more pleasant.”
Revolutionizing Everyday Life: How AI Outperforms Humans in Healthcare, Driving, and Beyond
Cramer also predicted that in ten years, people might wonder why they relied on human doctors when AI could provide more compassionate and effective care. These AI systems could analyze vast amounts of medical data to quickly identify serious health issues, making it easier to catch dangerous patterns before they escalate.
“It’s not just retail. In ten years, I think we’ll wonder why we ever wasted a doctor’s time when AI agents were so much better, kinder, and more empathetic. Doctors could analyze millions of test results that might have taken a decade to sort through, identifying dangerous patterns well before they become problematic, like melanoma, heart disease, or kidney cancer. It’s all in the data, and only AI can compile it in an accessible way.”
Additionally, Cramer noted that self-driving cars are becoming more common and are significantly safer than human drivers since they don’t get distracted or impaired. He mentioned that AI can handle tasks like proofreading without making mistakes, allowing law firms to operate with fewer associates.
“We see self-driving cars everywhere. They’re much safer than human drivers. They don’t drink and drive, they don’t even drink. An AI agent can proofread, correct, and never make a mistake. Law firms can now hire half as many associates because of this efficiency”
Finally, Cramer emphasized that AI agents generally outperform humans in most scenarios. For repetitive tasks, he believes it’s preferable to engage with a courteous and efficient AI rather than a stressed human who may not want to help.
“The bottom line is that if you let the AI agent do its job, it will outperform humans in the vast majority of cases. And for repetitive tasks, trust me: you’d much rather have a polite and friendly AI agent than a harried, angry, or exhausted human who really doesn’t want to deal with you.”
Our Methodology
This article provides a summary of Jim Cramer’s latest episode of Mad Money, where he reviewed several stocks. We picked 12 companies and ranked them based on how much they are owned by hedge funds, starting with the ones that are least owned and moving to those that are most owned.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician soldering components for a semiconductor board.
Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Investors: 75
Jim Cramer discussed Intel Corporation (NASDAQ:INTC)’s financial situation after reading the company’s recent releases. He emphasized that fixing the balance sheet should be the top priority, as Intel appears to have more money going out than coming in over the next year. While the much-talked-about deal with Amazon Web Services for next-generation AI chips is significant, it comes with hefty costs for capital equipment, and Intel Corporation (NASDAQ:INTC) currently lacks the funds to fully realize these ambitions.
Cramer pointed out that the most important news from Intel Corporation (NASDAQ:INTC)’s announcements wasn’t the AWS deal, but rather the suspension of plans to build large facilities in Germany and Poland.
“First thing we do is fix the balance sheet. That’s what I thought when I read the various releases issued by Intel last night, including one meant to alleviate balance sheet concerns. The company seems to have much more money going out than coming in over the next 12 months. Of course, what everyone is talking about is Intel’s deal with Amazon Web Services to provide them with next-generation chips for AI. I know it’s a big win, but it requires Intel to spend a fortune on capital equipment. Unfortunately, right now, Intel doesn’t have the money to build out everything it wants to or even what it’s committed to building.
That’s why the best news we got last night wasn’t the AWS deal; it was Intel’s suspension of its plan to build gigantic plants in Germany, which were expected to cost as much as €30 billion, and in Poland, which was to cost €4.6 billion. This pause is causing great turmoil, especially since the German government committed €10 billion to Intel to get that facility up and running. It was a linchpin of Germany’s attempt to support job growth, especially in the semiconductor space. Now that the auto industry has cooled, these actions are being taken to buy time.”
With new leadership, Intel Corporation (NASDAQ:INTC) is undergoing a major restructuring to improve operational efficiency and manufacturing capabilities, focusing on its foundry services to better compete with rivals like TSMC and Samsung.
In its recent Q2 2024 earnings report, Intel Corporation (NASDAQ:INTC) reported revenues of $13.2 billion, a 10% increase from the previous year, along with an adjusted earnings per share (EPS) of $0.50, surpassing analyst expectations and signaling a recovery from past downturns. Intel Corporation (NASDAQ:INTC) plans to launch new products, including its 14th Gen Core processors and advanced server chips, aimed at regaining market share in consumer and enterprise segments, especially in the growing AI and data center markets.
Intel Corporation (NASDAQ:INTC)’s significant investments in AI technologies and high-performance computing demonstrate its commitment to these key growth areas, highlighted by the announcement of its Gaudi AI chip. Partnerships with major tech firms like Microsoft and Google enhance its technology offerings and support broader adoption of Intel Corporation (NASDAQ:INTC)’s innovations. Recent product launches and plans to expand manufacturing in the U.S. and Europe align with global semiconductor demand trends, positioning Intel Corporation (NASDAQ:INTC) for strong growth and recovery in a competitive market.
Ariel Global Fund stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q2 2024 investor letter:
“Alternatively, several positions weighed on performance. One of the world’s largest semiconductor chip manufacturers by revenue, Intel Corporation (NASDAQ:INTC), underperformed in the period on news of a longer than expected turnaround in profitability within the Foundry business. This was exacerbated by disappointing near-term guidance due to a weakening demand environment signaling an extended replacement cycle.
We view the quarter as a temporary trough that should dissipate as we see signs of a cyclical recovery for personal computers (PCs) and central processing units (CPUs), driven by the Windows 11 upgrade. In our view, the market is overlooking the progress Intel is making to advance its manufacturing process. Not to mention, the company’s efforts to serve as a viable second source foundry partner of leading-edge silicon.
We believe the separation of the design and manufacturing businesses will be a key catalyst in unlocking improved financial performance while also enhancing the competitiveness of the foundry business.”
Overall INTC ranks 5th on our list of Jim Cramer’s must-watch stocks. While we acknowledge the potential of INTC as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than INTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.