Due to its disappointing reports, so-so management, and lack of revival strategies, Intel (NASDAQ:INTC) lost significant ground over the past few decades to old foes.
Although the transitioning management and the 90-day pause on “reciprocal” tariffs resulted in some short respite, shareholders are justifiably worried that a sinking ship is slowly going under? After all, Intel still has the same struggles, but maybe just maybe there is light at the end of the tunnel.
While Intel gained 7% over the past three months, it still was not enough to prevent the stock from stopping at September 2024 lows and the share price sank to $18 in a recent session. The shares declined 47% over the past year alone.
Management is still expecting growth and profitability, particularly on the back of its accelerating manufacturing capabilities, which they believe will revolutionize Intel for good and regain its competitive edge against its contemporaries like AMD and Nvidia but are they right?
Head-to-Head Competition From AMD
Advanced Micro Devices (NASDAQ:AMD) is standing as a tough competitor against Intel. On the surface, Intel is still dominating various segments over AMD but if we peer through the lens, the underlying problem becomes more and more visible.
Intel’s CPU market share tumbled by 10.25% over the past decade, which doesn’t seem alarming at first glance given that it still holds a massive 76% of the market. But when you invert the perspective and look at AMD’s rise, the shift becomes much more striking. Thirteen years ago, AMD held just 13.75% of the market. Fast forward to 2024, and it’s grown to 24%.
That’s the past. Looking ahead, the competition may very well get fiercer. AMD has proven to be more nimble, embracing new technologies quickly and bringing them to market faster. Intel, meanwhile, has largely stuck to its playbook built on legacy strengths.
The rising popularity of AMD’s gaming PCs and laptops, driven by its Ryzen processors’ superior multi-threaded performance and affordability, is going to emerge as a significant challenge for Intel. By 2029, Intel’s market share may well contract to 60.8%, while AMD could command a 39.2% market share.
Can Intel Still Catch Up With the Market?
One major concern Intel has been dealing with for a long time was its CEO Pat Gelsinger leaving the company, which has now been resolved with the appointment of Lip-Bu Tan for the position.
However, now the technology company is facing another backlash from the market watchdogs concerning the extensive investments of their CEO in Chinese companies undertaken over decades through Walden International. Tan has made investments in over 600 Chinese firms, of which some are even linked to China’s military, hence raising concerns of conflict of interest.
CEO Lip-Bu Tan instantly took charge and is actively emphasizing reshaping Intel’s foundry and AI chip production alongside targeting efficiency and revival of manufacturing capabilities. Also, his plans inevitably include taking Intel ahead in the race for AI innovations.
One big talk that’s not leaving any street to touch upon is the news of reciprocal tariffs imposed from April 2. In this dimension, there’s good news for Intel, and the company’s stock did react to it as expected. As President Donald Trump announced a 90-day pause on reciprocal tariffs, Intel’s stock moved up by $3 from the previous session.
Also, the entire news of tariffs has come as a mixed basket for Intel shareholders. Currently, semiconductors are kept out of the lists of tariff-imposed segments, and this could be a strong incentive for the Intel 18A process, whereas tariffs do cover semiconductor manufacturing equipment in its ambit, making the expansion of Intel’s U.S. manufacturing facilities more expensive.
What Do the Numbers Say?
Q4 net revenues of $14.26 billion was down 7% year-over-year, whereas its full-year revenue decreased by 2% from the prior year to $53.10 billion.
The disappointment rolled on as Intel posted a narrow gross margin compared to the prior year. Gross margin for the fourth quarter was $5.58 billion versus the $7.05 billion attained in the fourth quarter of 2023.
Furthermore, Intel even lost its profitability by the concluding quarter of 2024. Where net income attributable to Intel was a solid $2.67 billion or $0.63 per share in the 2023 fourth quarter, it had diminished to a net loss of $126 million or $0.03 per share in the latest quarter.
Right now, Intel is making billions of dollars in investments toward expanding its manufacturing capacity and making key changes to re-assume former profitability.
Q1 2025 results are yet to be announced, but we have a business outlook provided during the fourth quarter results. According to the report, first-quarter revenue is expected to range from $11.7 billion to 12.7 billion, while gross margin is expected to be 33.8%.
Why Is Intel Struggling Against AMD?
Intel has struggled against AMD due to manufacturing delays and node slippage, particularly transitioning from 14nm to 10nm. AMD also leapt ahead after launching its Zen architecture in 2017.
Still, Intel is losing its momentum and market share due to its direct competition with AMD. AMD is growing as a favorite among active and intense users of laptops or desktops who require efficient performance built-in with the latest advancements. Hence, as Intel’s manufacturing facilities building initiatives are still being processed, they will have to wait for their turn in the market.
39 out of 42 analysts have given the company a Hold rating, while they see an upside of 16% ahead for the stock from its current price. The stock is currently trading at 1.61 times forward sales and 0.77 times forward book, both lower than the sector median and indicating an undervaluation. To sum it up, it appears prudent to wait for a better entry in this stock.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.