Why ‘AI Laggard’ Intel and AMD Stocks Could Rise in Value in the Second Half of the Year

Key conclusions

Intel and Advanced Micro Devices (AMD) could rise as part of a “catch-up” in the second half of the year, Melius Research said. The companies, along with Apple and IBM, were among analysts’ “AI laggards” in the first half of 2024.
Analysts noted a trend in 2023 where “underdogs” underperformed in the first half of the year but caught up in the second half, while some “AI winners” experienced the opposite effect.
Melius said AMD and Intel could benefit from Microsoft’s Copilot+ computers, Apple could benefit from the iPhone 16 update cycle, and IBM has the opportunity to benefit from the potential of software infrastructure.

Intel (INTC) and Advanced Micro Devices (AMD) are poised to gain in the second half of the year, according to Melius Research, with the companies being labeled “AI laggards” earlier this year.

Intel shares were up more than 5% in afternoon trading Monday, narrowing a more than 30% loss since the beginning of the year. AMD shares were up 3%, and the stock has gained 20% since the beginning of 2024. While the chipmaker has outperformed the nearly 17% gain in the S&P 500 since the beginning of the year, it has lagged significantly behind Nvidia (NVDA), which has more than doubled in the same period.

Could the second half of 2024 be a reflection of 2023?

Melius analysts noted that the “AI winners” from the first half of 2023 experienced a lull in the last six months of 2023, while the “underdogs” from the first half gained.

They cited the example of the VanEck Semiconductor ETF (SMH), which gained 50% in the first half of 2023 but was only up 15% in the second half of 2023. Meanwhile, they said, companies like Intel and Dell saw their stocks perform well in the second half of last year.

Melius analysts say the second half of 2024 could see a similar trend.

AMD, Intel, Apple and IBM could catch up in the second half of the year

Melius analysts write that “we believe there may be a ‘catch-up’ in some of the semiconductor, hardware and even software sectors,” as increased spending by large tech companies on artificial intelligence (AI) investments may have less of an impact on results in the second half of the year.

They named AMD, Intel, Apple (AAPL) and International Business Machines (IBM), calling them stocks that performed poorly in the first half of the year and could benefit from a “catch-up.”

Melius analysts said AMD and Intel could benefit from their chips finding their way into Microsoft devices, as the company is poised to launch a “Recall” feature in its Copilot+ PCs, which could be “the closest thing we have to a ‘killer app’ update.”

Analysts say Apple is ready for an AI-powered iPhone 16 update cycle. Apple unveiled iOS 18 with Apple Intelligence and an AI partnership with OpenAI at its developer conference in June.

Analysts say infrastructure software has the potential to be a big success and they point to IBM in this area.

Apple and IBM shares were rising on Monday afternoon, gaining nearly 18% and 8% year-to-date, respectively.