The semiconductor industry, vital to modern technology, has been shaken by volatility in 2024, and Intel Corporation (INTC) stands at a crossroads. Once the undisputed leader in chipmaking for PCs, Intel now faces fierce competition from rivals like Nvidia (NVDA) and Advanced Micro Devices, Inc. (AMD).
Amid soaring global demand for advanced chips, governments have pumped billions into boosting domestic production, with Intel receiving a reduced share of the U.S. Commerce Department’s over $8 billion chip fund. To make matters worse, Intel was recently booted from the benchmark Dow Jones Industrial Average ($DOWI) and replaced by Nvidia – a clear confirmation of its flagging price action.
The company grabbed headlines on Monday amid news that co-founder Pat Gelsinger had been ousted from the CEO role by an unhappy board, with the current CFO and newly tapped CEO of product stepping up to jointly fill the role on an interim basis. While this suggests the semiconductor heavyweight is taking its turnaround seriously, it also seems to confirm that the progress toward Intel’s next phase is a painfully slow process.
With Intel stock down over 50% on a YTD basis, can this semiconductor giant overcome its challenges and reignite growth, or is INTC still a stock to avoid right now as management scrambles to right the ship?
About Intel Stock
Intel Corporation (INTC), headquartered in Santa Clara, California, boasts a market cap of over $103 billion. A pioneering force in semiconductor innovation, Intel designs and manufactures central processing units (CPUs), graphics processing units (GPUs), system-on-chips (SoCs), and advanced semiconductor solutions. With its rich legacy of powering the digital era, Intel remains a cornerstone of global computing, shaping industries from AI to data centers and beyond.
INTC stock has crumbled 46.7% over the past 52 weeks, losing more than half its value since January alone. Its record high of $75.81 on Aug. 23, 2000 now feels like a relic, with shares languishing at a fraction of that.
As of Nov. 8, INTC was removed from the Dow in favor of Nvidia. The move, though unsurprising, underlines Intel’s diminished standing in a competitive landscape dominated by AI-powered innovators.
The stock is cheap at current prices, trading at just 1.96 times sales. However, Intel’s low valuation is directly tied to the stock’s underperformance and flagging financials, which means investors should proceed cautiously before rushing to buy the shares at a discount.
Intel Rallies After Q3 Earnings
INTC cratered after its Q2 earnings report in August, which included news that the chip giant would pause dividends starting in Q4. However, the most recent Q3 report was much more warmly received, likely due in part to Wall Street’s increasingly low expectations for Intel.
After reporting mixed Q3 earnings results, Intel shares rose 7.8% on Nov. 1. Revenue fell 6% annually to $13.3 billion, beating Wall Street’s $13 billion forecast. However, the $0.46 per-share loss, amplified by hefty one-time costs like $3.1 billion in impairment charges and restructuring expenses, was substantially wider than Wall Street’s forecast for a loss of $0.03 per share.
Intel’s Data Center and AI (DCAI) segment generated a 9% annual revenue jump to $3.3 billion. Conversely, its Client Computing Group (CCG) faced headwinds, with PC chip sales down 7%.
In Q3, the tech giant announced plans to spin off its struggling Intel Foundry as an independent subsidiary, carving a distinct identity for its external customer and supplier ties. This maneuver not only enhances transparency but also empowers Intel Foundry to seek independent funding and streamline its capital structure, unlocking growth potential for both entities.
For Q4, management is forecasting revenue between $13.3 billion and $14.3 billion, with adjusted EPS expected at $0.12.
What’s Next After the C-Suite Shakeup?
Notably, CHIPs funding may have played a role in Gelsinger’s forced departure. The Biden administration granted Intel a reduced $7.86 billion grant under the CHIPs Act, but the funding requires Intel to maintain a controlling stake in its cash-burning foundry business.
In a post-Gelsinger note, Truist analyst William Stein suggests that Intel may need to go further than searching for a new CEO, and instead shake up its entire culture.
"We credit Gelsinger for making some significant changes at the company, but in our view he didn't move fast enough or go far enough,” wrote Stein. “Another CEO who tries to improve execution of Gelsinger's strategy seems unlikely, and we recall the challenges INTC had finding a CEO in each of the last two searches. We think INTC needs a more radical change."
What Do Analysts Expect for Intel Stock?
Wall Street remains skeptical about Intel’s prospects, with a consensus “Hold” rating.
Among the 36 analysts in coverage, one suggests a “Strong Buy,” 30 recommend a “Hold,” one advises a “Moderate Sell,” and four maintain a “Strong Sell” rating. The average analyst price target of $26.55 indicates about 15.6% potential upside from the current price levels.
