I figured that we would have a little fun this Friday by looking at two of the companies that may not be on your AI Radar, including a few ideas on how to trade them.
It was a huge week for the AI and AI Services companies this week as earnings season finally arrived for some of the biggest AI names.
NVIDIA was at the top of everyone’s screen, including mine, as the company was set to blow investors hair back with another incredible quarter of earnings results, but things haven’t turned out the way a lot of investors were hoping.
If you didn’t see it earlier, we nailed the market’s reaction to NVIDIA’s earnings report days ahead of the call. You can check it out here.
Also, if you missed it, I covered trading NVIDIA "by the numbers" ahead of its earnings call on Wednesday and the stock is following the playbook I laid out to a "T".
Here's the playbook on how to Play NVIDIA by the Numbers
Now, let’s take ten minutes to go through a quick review of two "other" AI companies, Dell and Intel, to give you a few trade ideas to navigate this bifurcated group of stocks.
Why Intel? Because it was at the top of the headlines this morning and the stock is trading up 10%.
Just yesterday, Intel was at a tech conference talking about how cost cuts were underway and that the company was expecting improvements in their revenue and margins.
This comes after a very disappointing earnings report a few weeks ago, which dropped Intel from $30 down to $20, close to its tangible value price.
That's an important point Because this morning it was announced that the idea of splitting the product and the foundry units of Intel is under review.
Shortly after that speculation that Intel was working with its bankers to come up with a variety of options to help fix the business hit the wires. These headlines were followed up with the possibility that Intel might be getting involved with an activist investor.
From what little we know right now, it looks like a reform of Intel's business could be underway, which is likely to spell trouble for the CEO, Pat Gelsinger. This move may be exactly what fires up the base of Intel Investors as the company appears to have the potential to mark a huge turning point for the once semiconductor leader.
From a long-term perspective, there is more value in Intel than the $22.00 price per share reflects. The problem with that is the company has needed a turnaround moment for more than a year.
I’ve held the opinion that Intel could be positioned as an acquisition candidate for a company like Alphabet, Microsoft or any other AI giant looking to bring chip development to the United States. For that reason, I have been a buyer as the stock dipped lower to its $20 lows.
That said, the stock is a speculative long-term play and remains in a long-term bear market trend. I would have never thought I would call Intel a “Value”, but that’s what it appears to be.
My best alternative to play this long-term game with Intel is by way of purchasing the stock at its current price or purchasing the January 16, 2026, $25 LEAPs Calls for a price of $265 per contract.
A rally to $30 over the next year would calculate to a minimum theoretical value of $695 per contract.
From a shorter-term perspective, we saw a similar speculative rally in Intel shares from $30 to $37 in July ahead of Intel’s earnings.
That move exaggerates the fact that there are short-term speculators that are willing to buy the stock.
Today’s rally is likely to follow that course with a 2-4 week rally that takes shares of Intel to $27. That’s a 20%+ move in the stock. Due to the stock’s volatility, a reasonable stop-loss target would be a prudent move to protect a fast reversal in the stock.
Dell turned in a strong earnings report after the close on Thursday.
The company reported earnings per share there were 19 cents better than analysts expectations at $1.89.
Revenue for the quarter was also better than expectations, growing 9.1% on a year over year basis. That's better than last quarter 6.3% increase. The quarter before last DEL showed an 11% decline in revenue. Dell is a revenue turnaround story.
Dell's Infrastructure Solution Group segment jumped 38% on a year over year basis. That's the department that is grabbing the AI server business that is booming.
Remember, Nvidia's results were positive, Dell is now catching up with the AI curve as customers are putting in NVIDIA and other AI chips into Dell servers.
The one catch with Dell's earnings report was the company's guidance.
Does management guided a little softer than what investors were looking for, which is why the stock is only trading 5% higher today. Well, that and the fact that the market is seeing light volume due to the holiday weekend.
The companies maintaining a strong outlook for the fiscal year 2025 as they continue to see strong demand for their server business.
Shares are trading 55% higher for 2024 and the slowdown in AI industry stocks has held shares of Dell back.
In addition, the company announced disappointing earnings in late May. That brought the stock down from its 2024 highs at $175 all the way to below $100.
Dell is preparing to cross above its 50-day moving average, which has been in a bearish trend. A move above the $125.00 level is going to spark technical buying as the stock crosses above that important 50-day trendline.
The stock is likely to see some selling pressure along with the rest of the market in September, which will set things up for a strong fourth quarter trade for Dell Technologies.
Watch for a volatility surge to move shares of Dell higher as the stock shifts into a bullish momentum pattern above $125.
That momentum is set to carry Dell’s price back towards its 2024 highs as the year comes to an end.
From a long-term perspective, I use the same approach as Intel.
The January 16, 2026 $130 LEAPs Calls trade for $2,240 today. This option gives me the ability to leverage a long-term move in Dell shares.
A returns to the $175 high over the next 300 trading days will result in a theoretical value of $5,281, more than double the initial investment.
For the shorter-term, my target for $175 is reasonable, but I would target to profit on any move above $150 by using the January 17, 2025 Dell $125 calls which are trading at $1,010 per contract.
These slightly out of the money calls are a great way to position for a bullish surge above the $125 price and Dell’s 50-day moving average.
A $150 price on Dell by the end of December would net an intrinsic value of $25 against the $1,010 investment.
As always, please make sure that you have the education and experience using options when considering any of these trading ideas.
