The stock market is looking scary right now as investors worry about the impact of tariffs and the ongoing effort to slash government spending. It can be tempting to stay on the sidelines, but it’s important to remember that investing is a long-term game. If you’ve got $1,000 to invest, choosing high-quality stocks that are reasonably priced and holding them for years is a winning strategy. Two great options right now are International Business Machines (NYSE: IBM) and Intel (NASDAQ: INTC).
Is artificial intelligence (AI) a revolutionary technology that will change the world in profound ways? Or is it just another tech tool and not necessarily the next big thing? While the AI industry is pushing the idea that AI will replace workers and beat humans at nearly every task within a few years, there’s a decent chance the technology has been overhyped.
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Regardless of how the AI boom evolves, there are genuine real-world use cases for AI that will help companies reduce costs and boost productivity. IBM, an AI pioneer that’s been working with the technology for decades, has found a business model that should work well under almost any scenario. Instead of training cutting-edge AI models on all the world’s data or spending incredible sums on AI data centers, IBM is focused on providing clients the tools and expertise necessary to deploy and manage small, inexpensive AI models fine-tuned for specific tasks.
IBM’s consulting business, which accounts for most of the more than $5 billion in generative AI business booked so far, is the company’s most valuable asset in the battle for AI customers. The expertise and implementation services provided by IBM’s consulting arm are paired with watsonx, the company’s AI software platform. Through watsonx, clients can fine-tune, deploy, and manage AI models and agents with a focus on governance and observability.
AI is only a small part of IBM, but it’s growing rapidly. In the fourth quarter of 2024 alone, IBM booked more than $2 billion worth of generative AI-related business. This AI growth will help accelerate overall revenue growth beyond 5% in 2025. In addition to AI, hybrid cloud computing and a new AI-enabled mainframe system should provide a boost this year.
IBM is valued at around $230 billion , or roughly 17 times the company’s free-cash-flow guidance for 2025. While the stock isn’t the screaming bargain it has been at times over the past few years, IBM is still attractive for 2025 and beyond.
Valuing Intel is tough because profits are deeply depressed by a combination of heavy spending on manufacturing facilities and a rough period for the product business. Intel has been pouring billions into its foundry business, developing new process nodes in rapid succession and building new facilities around the world. While the cutting-edge Intel 18A process is now ready for production, external revenue really won’t ramp up until 2026 or 2027 as the company goes after new customers.
In the products business, Intel has struggled with weak demand for PCs, tough competition from AMD, and a shift in priorities in the data center toward AI accelerators. Intel’s own AI accelerator business failed to take off, and its server central processing units (CPUs) have lagged AMD’s products for years. Progress was made in 2024 with Granite Rapids, but market share is still trending in the wrong direction.
While Intel’s overarching strategy appears sound, execution has been a major issue. New CEO Lip-Bu Tan, who previously quit Intel’s board over disagreements with management, is now in charge and likely to make some major changes. Shifting Intel’s entrenched risk-averse culture will be a challenge, but the company needs to move faster to reclaim its former glory. Layoffs may be in the cards, and Tan is reportedly planning a push to win new foundry customers and revamp the company’s AI strategy.
Intel is an asset-heavy company, so the price-to-book value ratio is a useful tool for gauging how the market views the company. Right now, Intel is valued below its book value, a historically low valuation. Intel will need to get its act together for the stock to recover, but if Tan delivers a successful turnaround, Intel stock has room to soar as revenue and profit bounce back.
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*Stock Advisor returns as of March 24, 2025
Timothy Green has positions in Intel and International Business Machines. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and International Business Machines. The Motley Fool recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.
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