INTC Plunges 35% in the Past Year: Should You Dump the Stock?
Intel Corporation INTC has plunged 35.1% over the past year against the industry's growth of 12.3%, lagging its peers Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA. While NVIDIA stock is up 16.4%, Advanced Micro has declined 27.5% over this period. Much of Intel's underperformance is attributable to the severe financial difficulties and operational challenges as it plays a catch-up game with its rivals.
One-Year INTC Stock Price Performance
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While most of the competitors evolved with the changing demand patterns, Intel fell behind others as it hung on to its legacy products. For example, despite making significant inroads in AI (artificial intelligence) chips, Intel lagged NVIDIA on the innovation front with the latter's H100 and Blackwell graphics processing units (GPUs) being runaway successes. This offered a competitive advantage to NVIDIA, with leading technology companies reportedly piling up NVIDIA's GPUs to build clusters of computers for their AI work. Moreover, Intel has been facing challenges due to the disruptive rise of over-the-top service providers in this dynamic industry. Price-sensitive competition for customer retention in the core business is expected to intensify in the coming days. Aggressive competition is likely to limit the ability to attract and retain customers and affect operating and financial results.
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An accelerated ramp-up of AI PCs has significantly affected Intel's short-term margins, as it shifted production to its high-volume facility in Ireland, where wafer costs are typically higher. Margins were also adversely impacted by higher charges related to non-core businesses, charges associated with unused capacity and an unfavorable product mix. Competitive pricing pressure from rivals has further dented its profitability.China accounted for more than 29% of Intel's total revenues in 2024, making it the single largest market for the company. However, the communist nation's purported move to replace U.S.-made chips with domestic alternatives significantly affected INTC's revenue prospects. The directive to phase out foreign chips from key telecom networks by 2027 underscores Beijing's accelerating efforts to reduce reliance on Western technology amid escalating U.S.-China trade and tariff tensions.As Washington tightens restrictions on high-tech exports to China, Beijing has intensified its push for self-sufficiency in critical industries. This shift poses a dual challenge for Intel, as it faces potential market restrictions and increased competition from domestic chipmakers. In addition, weaker spending across consumer and enterprise markets, especially in China, resulted in elevated customer inventory levels.
Earnings estimates for Intel for 2025 have moved down 40.8% to 29 cents over the past year, while the same for 2026 has declined 31.2% to 77 cents. The negative estimate revision depicts bearish sentiments for the stock.
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Intel is investing to expand its manufacturing capacity to accelerate its IDM 2.0 (Integrated Device Manufacturing) strategy. Interim management is committed to keeping the core strategy unchanged despite efforts to drive operational efficiency and agility. The company is emphasizing the diligent execution of operational goals to establish itself as a leading foundry. Its latest Xeon 6 processors with Performance-cores (P-Cores) can support large AI workloads across diverse sectors. With industry-leading capabilities in AI processing, the Xeon 6 family delivers the industry's best CPU for AI at a lower total cost of ownership. Intel's innovative AI solutions are set to benefit the broader semiconductor ecosystem by driving down costs, improving performance and fostering an open, scalable AI environment. The company has received $7.86 billion in direct funding from the U.S. Department of Commerce for its commercial semiconductor manufacturing projects under the U.S. CHIPS and Science Act. The funds will support Intel in advancing critical semiconductor manufacturing and advanced packaging projects in Arizona, New Mexico, Ohio and Oregon, likely paving the way for innovation and growth.Intel remains on track with its 5N4Y (five nodes in four years) program to regain transistor performance and power performance leadership by 2025. Intel Xeon platforms have reportedly set the benchmark in 5G cloud-native core with substantial performance and power-efficiency improvements, additional power-saving capabilities and easy-to-deploy software. This has triggered healthy demand trends from major telecom equipment manufacturers and independent software vendors to optimize and unleash proven power savings for a more sustainable future.
Intel's innovative AI solutions hold immense promise for the broader semiconductor ecosystem. By addressing the challenges of scalability, performance and interoperability, it is paving the way for widespread AI adoption across enterprises worldwide. Management is focusing on simplifying parts of its portfolio to unlock efficiencies and create value. However, the recent product launches appear 'too little, too late' for Intel. In addition, margin woes amid strict export restrictions, unfavorable product mix and elevated customer inventory levels weigh on its bottom line. Declining earnings estimates remain an overhang. With a Zacks Rank #3 (Hold), Intel appears to be treading in the middle of the road, and investors could be better off if they exercise caution and stay invested for long-term gains. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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