Compared to its long-standing adversary AMD (NASDAQ: AMD), Intel (NASDAQ: INTC) severely underperformed. Year-to-date, AMD stock gained 11.5%, while INTC shares lost 37.4%. Over one year, this divergence is even more pronounced, with AMD increasing by 63% while INTC is decreasing by 3%.
Although both semiconductor companies supply the market with CPUs and GPUs, Intel has a significant lead in the CPU market. Moving forward, does that mean that Intel’s fundamentals are sound, making this a buy-on-weakness opportunity, or is Intel stock heading for a further slump?
What is Intel’s Current Market Positioning?
According to the annual CPU shipments report for full-year 2023, prepared by Canalys, Intel holds a massive market lead of 78%, excluding tablets. Intel’s year-over-year shipments growth also surpassed AMD at 3% vs. -1%, with Apple shrinking by 4%. Mediatek tracked the largest growth spurt of 27% while Qualcomm (NASDAQ: QCOM) saw a 17% decline in shipments.
By PC vendors, Intel is more diversified, gaining revenue relatively evenly from Dell (NYSE: DELL) (26%), HP (NYSE: HPQ) (21%), and Lenovo (26%). AMD’s vendors are more concentrated, divided between Lenovo (40%) and HP (28%). Qualcomm, having had the highest shipments decline of 17%, is nearly entirely dependent on Acer (74%) and Dell (26%).
When it comes to the GPU market, everyone is behind Nvidia (NASDAQ: NVDA). Although Intel dominates the market at 67% share in Q4 2023, that is owing to the integrated graphics sector. Intel is a latecomer in the discrete GPU market arena, having launched Iris Xe Max in October 2020. Since then, until Q4 2022, Intel’s dGPU market share increased to an estimated 9% with its ARC lineup.
What is Intel’s Financial Status?
At the end of April, Intel delivered its Q1 2024 earnings report. After beating the prior three quarters’ estimates, the company suffered a negative (loss) earnings per share of $0.06 vs estimated -$0.03.
Intel delivered a net loss of $381 million compared to the year-ago loss of $2.7 billion. Intel’s total assets remained relatively flat year-over-year, at $192.7 billion vs $191.5 billion in 2023. During that period, the company’s total liabilities slightly decreased, at $27.2 billion vs $28 billion in a year-ago quarter.
This puts Intel’s debt-to-equity ratio relatively low at 0.495, although AMD’s ratio is even lower at 0.044. After securing $8.5 billion from the US CHIPS Acti, alongside $11 billion in loans, Intel Foundry delivered an operating loss of $7 billion.
Intel CEO Pat Gelsinger expects these investments to generate profits between 2027 and 2030. If that materializes, and there is no shortage of qualified personnel, Intel could become one of the world’s largest semiconductor companies, sandwiched between TSMC and Samsung.
For Q2 ’24, Intel expects another earnings (loss) per share of $0.05 and revenue range of $12.5 – $13.5 billion from this quarter’s $12.7 billion.
Intel’s Entanglement with Israel
Given the perennial Middle East volatility, it bears noting that Intel started heavily investing in Israel at the end of 2023, launching a $25 billion package. This led to Intel’s reliance on Israel’s multiple manufacturing and research and development facilities.
Additionally, there have been speculations that Intel implemented backdoors into Management Engine (ME) on CPUs. Purported undocumented x86 instructions also pushed the public perception in the negative direction.
Considering recent developments in the region, the international backlash may reflect badly on Intel as well among consumers.
Analyst Forecast for INTC Stock
Per Nasdaq’s aggregated data, INTC’s average price target is $39.92 vs the current $29.79, which is not far off from the 52-week low of $26.86 per share. The high estimate is $68, while the low forecast is $17.
Overall, Intel’s heavy investments are taking a toll in the short to medium term. But considering the company’s domineering market weight for both GPU and CPU sectors, alongside USG’s blessing to revitalize the semiconductor industry, INTC stock is in a good position for long-term investors.
Do you hold heavy or light exposure to semiconductor stocks? Let us know in the comments below.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.