The brutal sell-off in Intel (INTC 6.24%) The stock may finally be over. The stock seems to have risen again following the news that the company plans to convert its foundry business into a subsidiary. It also expanded its contract with Amazonand signed a new contract to manufacture artificial intelligence (AI) chips for Amazon Web Services (AWS), which could make the company a major player in the AI ​​server chip market.

Still, given the stock’s performance over the past few months, one might wonder whether the recent upswing is a sign of an impending sustained recovery at Intel or whether investors should continue to avoid the stock.

Intel’s new life

There is no doubt that Intel has fallen into decline, and its attempt to get back to the top under CEO Pat Gelsinger has not gone as planned. The company had ambitious plans to spend tens of billions on new foundries, to build a third-party chip manufacturing company that would compete with Semiconductor manufacturing in Taiwan (TSMC) and Samsung.

The company also made technical improvements and boldly claimed to regain process leadership by 2025. However, planned investments of $25-27 billion next year will put a significant strain on the company’s balance sheet. Several sources also told Reuters that the chips Intel produced for 2018 Broadcom has failed the company’s tests, calling into question Intel’s ability to compete in this business.

The fact that Intel is suspending its dividend and laying off over 15% of its workforce shows that the company is far from meeting its goals. This news in August sent the stock to a multi-year low.

But the foundry business still has room for improvement. Intel will turn this business into a separate subsidiary, which will then have its own operational management and the ability to raise capital independently. In addition, the above-mentioned deal with AWS could help make Intel’s foundry business a top company in its industry.

The new investment thesis of Intel shares

Before this latest rally, Intel stock had fallen about 60% year to date. Against this backdrop, the investment thesis for Intel has arguably become compelling for one main reason: valuation. However, the P/E ratio of 93 does not reflect this.

In contrast, the price-to-sales ratio (P/S) is just under 2, far below the competitor’s P/S ratio of 11 AMDThe undervaluation is reflected primarily in a price-to-book ratio of less than 0.8. This means that the market has valued Intel at more than 20% below the value of its assets minus its liabilities. This value is probably far too low for a company that continues to be a major chip designer and producer.

At the same time, investors have many options when it comes to semiconductor stocks. As Intel has lost value, stocks like AMD, QualcommAnd NVIDIA have delivered market-beating returns as they find customers in the AI ​​chip market. Investors must ask whether the bargain in Intel stock is worth it considering the clearer opportunities offered by Intel’s competitors.

Investing in Intel shares

Investors who decide to buy Intel shares should probably limit their exposure to small, speculative positions.

Given the company’s valuation, the stock actually looks like an attractive bargain, assuming the company can raise more outside capital and successfully produce Amazon’s AI chips. However, the chip industry is in a period of significant long-term growth thanks to the AI ​​trend, and many of Intel’s competitors have seen sizeable price increases while the stock has fallen. Additionally, the setbacks in the Broadcom deal raise questions about whether the company can execute on its plans to deliver new high-end chips, underscoring the risks associated with speculation about Intel’s recovery.

Ultimately, Intel stock could be on the verge of a long-awaited recovery. But until the company can successfully resolve further uncertainties surrounding its business, investors should be cautious about buying shares – if at all.