Intel Corp. (NASDAQ:INTC) has been lagging behind its semiconductor peers for the past 18 months, and its underperformance has raised significant concerns about its future in the market. While the broader semiconductor industry has surged, Intel stock continues to decline, leaving investors wondering if the company will manage to stage a comeback. The focus keyword for this article, Intel stock performance, highlights the critical question of whether Intel can regain its once-dominant position in the tech industry.
Intel Stock Performance Compared to Competitors
The past 18 months have been stellar for most large-cap semiconductor stocks, with companies like Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) seeing significant growth. The VanEck Semiconductor ETF (NASDAQ:SMH), which tracks the sector, has more than doubled its returns, while Intel stock is down by nearly 30% in 2023 alone.
If we zoom out and assess Intel stock performance over the past decade, the gap becomes even more glaring. Since 2014, the VanEck Semiconductor ETF has delivered returns exceeding 700%, while Intel’s stock has dropped nearly 46% in market value. This stark contrast highlights Intel’s ongoing struggle to keep up with the rapid advancements made by its competitors in AI and semiconductor technology.
Intel’s Struggles and Potential Dow Removal
Intel’s prolonged underperformance has led to speculation that it might be removed from the prestigious Dow Jones Industrial Average (DJIA). Intel was one of the first tech companies to join the index during the dot-com boom, but today, it is the lowest-weighted stock, accounting for only 0.31% of the DJIA. As a result, many analysts are suggesting that Intel could be replaced by a more dynamic semiconductor company such as Nvidia or Texas Instruments (NASDAQ:TXN).
The issue with Intel stock performance stems largely from increasing competition and the company’s difficulty in adapting to new technologies. Its revenue has fallen, and its once-strong cash flow has diminished. In response, Intel has had to suspend its dividend payments and reduce its workforce by 15%, as revealed in its Q2 earnings report for 2024.
Can Intel Stock Stage a Comeback?
Despite these challenges, there are still signs that Intel may be able to reverse its fortunes. Recent reports from Bloomberg suggest that Intel is exploring strategic options with investment bankers, including the possibility of splitting its business segments. The company’s heavy investments in building a chip manufacturing foundry to compete with Taiwan Semiconductor Manufacturing (NYSE:TSM) have burdened Intel’s balance sheet. Splitting off the foundry business from its core chip design operations could unlock shareholder value and improve Intel’s overall business fundamentals.
Additionally, Intel has announced a $10 billion cost-reduction plan, which will involve cutting capital expenditures by at least 20% for the full year. In Q2 2024, Intel reported revenues of $12.83 billion, slightly below analysts’ expectations of $12.94 billion. Although the company posted an adjusted earnings per share of $0.02, its revenue fell 1% year-over-year, and it recorded a net loss of $1.61 billion.
Intel’s decision to aggressively scale production of Core Ultra PC chips, designed to handle AI workloads, contributed to the Q2 losses. However, the company is betting on the growth of the AI PC market, which it predicts will expand to over 50% by 2026. Intel also expects to ship over 40 million units of AI-powered PC chips in 2024.
Challenges in AI and Data Center Markets
While competitors like Nvidia and Broadcom (NASDAQ:AVGO) are rapidly growing their AI revenue, Intel’s AI and data center businesses have been slower to pick up. In Q2 2024, Intel’s data center and AI division reported $3.05 billion in sales, representing a 3% year-over-year decline. This lag in AI revenue, combined with overall declining Intel stock performance, has led analysts to issue cautionary ratings on the stock.
For the current quarter, Intel is forecasting revenue between $12.5 billion and $13.5 billion, with an adjusted net loss of $0.03 per share. Wall Street’s expectations for Intel were higher, with forecasts of $14.35 billion in revenue and $0.31 in earnings per share.
Analysts’ Take on Intel’s Stock Outlook
Given Intel’s uncertain future, analysts remain divided on the stock’s potential. The average target price for Intel stock is currently $29.19, representing a potential upside of over 50% from current levels. However, only two out of 36 analysts recommend a “strong buy,” while the majority maintain a “hold” rating on Intel stock performance, signaling that caution is still warranted.
Intel faces an uphill battle to regain investor confidence and reclaim its position in the semiconductor industry. While it is actively exploring new strategies, the company’s near-term prospects remain uncertain, making it a risky investment at this stage.
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