Intel Corporation, under the leadership of Pat Gelsinger since February 2021, is facing ongoing challenges as it seeks to change its strategic direction. Despite remaining a leader in the manufacture of chips for personal computers, the company has lost ground in certain sectors, largely thanks to the key emergence and development of cloud technology and artificial intelligence.
This raises uncertainties about the company’s future and generates doubts among investors about its attractiveness as an investment today. To fully understand the situation, it is necessary to analyze the positive aspects of Intel.
Intel’s turnaround strategy
Intel has been implementing a turnaround strategy in recent years to address the challenges in the semiconductor industry. This strategy has focused on cost reduction, reorganization of the company to separate the semiconductor foundry and design areas, and efficient allocation of funds.
Although Intel’s stock price has declined since Pat Gelsinger’s arrival as CEO, the company has made significant progress in these areas.
One of the main challenges Intel faced was losing market share to competitors such as Advanced Micro Devices (AMD). Although, throughout 2023, AMD has exhibited a downward trend in its shares despite having been considered an attractive buying opportunity in the past, with its current price of $100.34 representing a 7.57% decline and a recent downward trajectory.
The key $100 level has become critical, and its breakout could lead to a period of increased uncertainty and pressure. This trend in AMD is in line with the broader decline in the semiconductor sector; however, AI-based technical analysis suggests that AMD stock could reach $101.70 per share by October 1, 2023.
Intel has been affected also by delays in the production of new processors. However, the company has unveiled a new product roadmap that includes advanced process nodes such as Intel 7, Intel 4, Intel 20A, and Intel 18A. The last of these, Intel 18A, is expected to be launched before the end of 2024. This could help the company get back into competing against other leading manufacturers such as Taiwan Semiconductor Manufacturing Company (TSMC).
In addition, Intel is making progress on cost reduction, with an ambitious plan to cut up to $10 billion by 2025. This has involved reducing headcount and divesting non-core businesses. The reorganization of its manufacturing business as a stand-alone unit in 2024 is also expected to generate significant savings. These positive developments are generating investor confidence and could mark a change in Intel’s trajectory in 2024.
No political problems
Intel is in a favorable position concerning political decisions, as it is expected to play a significant role in the Biden Administration’s efforts to repatriate supply chains. Through the CHIPS and Science Act, Intel will receive government funding of between $2.5 billion and $7.5 billion to build manufacturing facilities in Arizona and Ohio as part of a $52.7 billion plan aimed at bringing chip production back to the United States.
Despite the requirements associated with this funding, being aligned with current policy decisions is an encouraging sign for the company as the Biden Administration focuses on job creation and competing with Chinese chip manufacturing technology.
But financial problems
On the other hand, Intel’s main drawback has been seen on the financial front.
Despite the company’s efforts to improve its situation, it faces notable financial challenges, with year-on-year declines in revenue in most quarters since the beginning of 2021. Revenue losses have become more significant, reflecting a worrying negative trend in its performance.
On the technology front, it is still uncertain whether Intel will be able to regain its position in the future, raising uncertainties for investors looking to bet on the company and suggesting the importance of exercising caution when considering investments in its stock.
Is Intel stock a buy?
According to Wall Street analysts, Intel Corporation has a consensus rating of “Hold” with an average stock price target of $36.23, representing a potential upside of 6% from the current price.
Despite the presentation of the product roadmap focused on artificial intelligence at its recent innovation day, and the CEO’s statements assuring that “Intel is going to incorporate AI across all platforms,” analysts did not significantly adjust their price targets, indicating that the event did not bring any major surprises.
Intel is changing its strategy, its current valuation and market uncertainty suggest that investing in the company may represent a big risk. So, do you think the best option is to wait a bit before investing in Intel? Do you think positive results could be obtained if you bet on the company?
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(Information in this post is for general informational purposes only. It cannot and should not be considered as suggestions or recommendations regarding investing or financial decisions.)
