Can Intel keep moving higher in the new year?

Dow's top performer... Intel
Dow's top performer... Intel   

A bet on Intel is a bet on the PC, and investors who wagered correctly on the company enjoyed big gains in 2014.

The chipmaker ripped higher last year, surging some 40 percent, and was the best performer in the Dow.

So, what explains the move in Intel's stock, and what can investors expect this year?

For one, the PC market in 2014 didn't crash and burn as many expected. Instead, it was basically flat, which is good news for Intel. The company dominates the market for PC chips, which accounts for 60 percent of its sales.

One tailwind for the PC market in 2014 was Microsoft's decision to end support for Windows XP, prompting companies to buy new computers. The question now is how much of a tailwind that will be this year.

Intel bull Christopher Rolland of FBR believes the tailwind will continue, and he points to another reason for optimism: Microsoft's release of Windows 10, which he says will lead to a better-than-expected refresh cycle.

For its part, Intel expects PC units to be flat and revenues slightly down in 2015.

The other big part of Intel's business is providing chips for server systems, which accounts for about 20 percent of its sales. The company says revenue in that business can grow at a 15 percent rate at least through 2018.

Craig Ellis, a senior semiconductor analyst at B. Riley, says that could add $7.5 billion in revenue over the next four years.

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What are the challenges for Intel in the new year?

At an investor meeting in November, the company said it would get its chips into 40 million tablets by the end of 2014, which is up from 12 million in 2013. But that division is expected to bleed losses this year, albeit at a slower rate. (We'll find out more when the company reports earnings on Jan. 15.)

Intel's executives are committed to making a profit in the mobile business. "We are in this business not to lose money, but to make money in the long run," Intel CEO Brian Krzanich said at the November investor meeting.

Another concern, after the stock's strong run, is valuation. Doug Freedman of RBC says Intel isn't cheap, at least based on some metrics. The stock is trading at 17 times free cash flow, he said, which is a premium to its peers.

Still, bulls are in charge when it comes to Intel, at least right now, betting on a stable PC market, growth in the data center business and the company's ongoing commitment to capital return.

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Intel didn't respond to a request for comment.