logo
Intel (INTC) Investors Stay Torn Between Dead Money Doubts and Recovery Hopes

Intel (INTC) Investors Stay Torn Between Dead Money Doubts and Recovery Hopes

Intel's (INTC) stock has been stuck in the mud, trading at depressed, multi-year-low levels of around $22 today, all while the broader semiconductor industry is on fire, with names like NVIDIA (NVDA) and TSMC (TSM) soaring. Despite the stock appearing like a value play here, Intel's issues, such as fierce competition, a struggling foundry business, and macroeconomic headwinds, are weighing heavily.
Elevate Your Investing Strategy:
Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
There are glimmers of hope, such as new AI products and cost-cutting efforts, but for now, the negatives overshadow any bullish case, making INTC a risky bet, even as a value play. Given the sorry state of affairs this stock finds itself in, I remain warily Neutral on INTC with a bearish bias.
Why Intel's Stock Is Languishing
Intel has been navigating a challenging period, and the bearish sentiment is far from unwarranted. AMD has steadily eroded its dominance in the CPU space, with Intel's server CPU market share falling to around 60% in 2024, down from over 80% a decade ago. Meanwhile, its foundry ambitions, aimed at rivaling TSMC, have become a financial drag. The division reported a staggering $7 billion loss on $18.9 billion in revenue in 2023, followed by another $4.3 billion in losses in 2024.
The company's profit margin profile is also dismal, with gross margins at about 33% over the past 12 months, down from roughly 34%, 42%, and 45% in FY2024, FY2023, and FY2022, respectively. Geopolitical risks are another gut punch, as tariffs could further erode margin over the near to medium term.
Some Reasons to Stay Hopeful
Now, look, it's not all bad news. Intel's latest earnings displayed some resilience, with $12.7 billion in revenue topping estimates of $12.25 billion and adjusted EPS of $0.13, which surpassed forecasts of a break-even result.
The Data Center and AI segment grew 8% year-over-year to $4.1 billion, a sign that Intel's AI pivot, including the Xeon 6 processor with a 1.9x performance leap for AI workloads and upcoming Panther Lake chips, is starting to click. Intel's also leaning into U.S. manufacturing, with $50 billion invested in domestic plants and $7.86 billion from the CHIPS Act, which could shine if U.S.-focused policies gain traction.
Lip-Bu Tan, Intel's new CEO, is also bringing a fresh vibe, aiming to cut $500 million from 2025 operating expenses (down to $17 billion) and aiming for $16 billion in 2026.
His push for a 'startup mindset' with less bureaucracy and more engineering could spark innovation. Intel's AI PC strategy is another potential win, with plans to ship 100 million AI PCs by year-end, assuming demand picks up. These are solid steps, but they need to deliver.
Excessive Risk Suggests a Pass on INTC
Despite a few encouraging signs, Intel is still falling behind in a semiconductor market that's otherwise surging. NVIDIA has a firm grip on the AI chip space, and TSMC's manufacturing edge is hard to beat. With NVIDIA's CUDA platform and Blackwell chips setting the tone, Intel's decision to outsource key products like Lunar Lake to TSMC only highlights how much ground it has to make up in its foundry ambitions.
Losses are expected to persist until at least 2030, and Intel's Q2 2025 revenue guidance of $11.2-$12.4 billion fell short of the $12.82 billion consensus. Another outlook miss is likely in Q3, given macro risks, especially given the tariffs.
Meanwhile, the stock's low price-to-sales ratio screams value (at 2x this year's expected sales). This is counterbalanced by a forward P/E of 78x on this year's expected earnings, which, again, reflects shaky earnings and high risk. Of course, the P/E falls to a more reasonable 29x on 2026's rebound potential to $0.80.
Still, that's a high P/E ratio given the current risk Intel faces in the semiconductor landscape. Additionally, Intel's significant $28.6 billion net debt position further adds to the reasons to avoid the stock. Even if Intel manages to recover and generate noteworthy profits, it will be a while before investors see tangible capital returns, as management will likely prioritize deleveraging first.
Is Intel a Buy, Sell, or Hold?
Currently, analysts remain skeptical about INTC's investment case. The stock carries a Hold consensus rating, based on one Buy, 26 Holds, and four Sell ratings assigned over the past three months. Today, INTC's average stock price target of $21.60 implies roughly 5% downside potential over the next twelve months.
In fact, the only bullish analyst on Wall Street is Gus Richard from Northland Securities, who expects INTC stock to hit $28 within 12 months.
Intel: A Cheap Stock with a Pricey Set of Problems
In short, Intel's story is one of potential buried under a mountain of problems. Yes, there are flickers of innovation and strategic pivoting, from AI PCs to domestic fabs, but execution risk remains sky-high. For every green shoot, there's a red flag, like underwhelming guidance, foundry losses, stiff competition, and debt that can't be ignored.
At $22, the stock appears to be cheap, but cheap doesn't always mean it's investable. Until Intel proves it can consistently deliver on growth, profitability, and innovation, this remains a 'show-me' story in a market that rewards execution, not promises.
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

TSM, ASML, and LRCX: The 3 Semiconductor Stocks Investors Must Know About
TSM, ASML, and LRCX: The 3 Semiconductor Stocks Investors Must Know About

Business Insider

time25 minutes ago

  • Business Insider

TSM, ASML, and LRCX: The 3 Semiconductor Stocks Investors Must Know About

Semiconductor stocks have enjoyed a strong uptick over the past few years as semiconductors are crucial for making some of the market's most exciting themes possible, whether it's generative AI, self-driving cars, or humanoid robots. That said, their importance to these powerful secular trends is now widely appreciated by the market, and therefore many top semiconductor stocks already enjoy fairly elevated valuations. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. However, shares of some of the most essential semiconductor manufacturing and equipment companies, which are crucial to the semiconductor supply chain, still offer a pocket of fairly reasonable valuations within the sector, especially given their indispensable role in the industry. Here, we'll take a look at three top semiconductor equipment and manufacturing stocks — Taiwan Semiconductor Manufacturing (TSM), ASML Holding (ASML), and Lam Research (LRCX) — that should all be on investor watchlists looking for exposure to the growth of these dynamic themes at a reasonable price. Taiwan Semiconductor Manufacturing Co. (TSM) Taiwan Semiconductor is the world's largest chip maker, with a dominant 60% share of the market. It also manufactures many of the world's most advanced semiconductors and enjoys a significant moat, as producing these chips requires considerable technological and engineering expertise and capital investment. Only a small number of companies globally have the capability to manufacture the most cutting-edge semiconductors, and Taiwan Semiconductor is the preeminent player in this segment of the market, boasting an estimated 90% market share of advanced chips. The company counts some of the world's most prominent semiconductor and technology companies as its customers, including Nvidia (NVDA), Advanced Micro Devices (AMD), and Apple (AAPL). Taiwan Semiconductor's unrivaled capabilities and substantial market share within advanced chips are paying off, as the company increased revenue 38.6% during the second quarter, with CFO Wendell Huang reporting that 'Our business in the second quarter was supported by continued robust AI and HPC-related demand.' There is a lot to like about TSMC's strong business model, yet the stock trades at a reasonable valuation of just 24x 2025 earnings estimates, just a slight premium to the broader market as the S&P 500 (SPX) trades for roughly 22x forward earnings estimates. This appears to be an attractive valuation for a company exhibiting Taiwan Semiconductor's revenue growth and a considerable moat. Is TSMC Stock a Buy, Hold, or Sell? Turning to Wall Street, TSMC earns a Strong Buy consensus rating based on six Buys, one Hold, and zero Sell ratings assigned in the past three months. The average TSM stock price target of $267.57 implies 10.75% upside potential. ASML Holding (ASML) Like Taiwan Semiconductor, ASML Holding (ASML) is an integral link within the global semiconductor supply chain. The Netherlands-based company manufactures photolithography machines for chip manufacturers, including TSMC, Samsung, and Intel (INTC). These are highly complex and expensive systems (with price tags of up to $200 million) that use light to etch circuit patterns onto a silicon wafer, a crucial part of the semiconductor manufacturing process. ASML is the only firm currently providing extreme ultraviolet lithography (EUV) machines, which are used to make the most advanced chips, giving ASML a powerful moat. ASML also manufactures deep ultraviolet (DUV) lithography machines, used in the production of older chips, and earns revenue from servicing these EUV and DUV machines for its customers. For these reasons, ASML is arguably one of the most important companies in the world. However, it isn't really priced as such. The stock trades for a reasonable 25x 2025 earnings estimates, just a slight premium to the S&P 500. The stock isn't ultra cheap, but it does carry an appealing valuation that the semiconductor industry is heavily reliant on. ASML is a dividend stock, currently yielding 0.92%. While this isn't a high yield, the company has slowly but surely been growing its dividend over time as its earnings power increases. For example, ASML has increased its dividend payout for nine consecutive years and grown it at an attractive 21.5% compound annual growth rate (CAGR) over the past five years. In addition to the dividend, ASML has also made extensive use of share buybacks to return capital to shareholders. Share buybacks are often beneficial to shareholders, as they reduce the company's share count, thereby increasing earnings per share and concentrating the company's earnings among a smaller pool of investors. They are also often seen as a sign that management believes that the stock is undervalued. Through the first two quarters of 2025, ASML has repurchased approximately 4.6 million shares of the company this year, worth roughly €4.25 billion. Despite its unique capabilities and strong business model (not to mention beating both revenue and earnings estimates), ASML fell sharply after reporting Q2 earnings earlier this month and has yet to recover. The stock is down more than 10% over the past month and 23.5% off of its 52-week high. The recent sell-off was based on the company guiding for lower Q3 revenue than the market expected, and stating it cannot confirm further growth in 2026 due to macroeconomic and geopolitical uncertainty. While the year ahead may indeed pose challenges, we are confident that over the long term, ASML's equipment and services will continue to be in high demand by the world's leading semiconductor manufacturers, making the stock an attractive long-term opportunity to buy on the dip. Is ASML Stock a Buy, Hold, or Sell? ASML earns a Moderate Buy consensus rating based on four Buys, five Holds, and zero Sell ratings assigned in the past three months. The average ASML stock price target of $863.83 implies 19% upside potential over the coming year. Lam Research (LRCX) Finally, let's examine Lam Research (LRCX), a vital player in the global semiconductor supply chain. The company designs advanced equipment for etching, deposition, and cleaning—critical steps in the chip manufacturing process. Like ASML, Lam also generates recurring revenue from servicing its complex and highly specialized machinery. While it faces competition from names like Applied Materials (AMAT) and Tokyo Electron, Lam operates in a niche with high technological barriers to entry, making it an attractive long-term prospect. Lam Research currently trades at around 24x forward earnings—only a modest premium to the broader market, suggesting a reasonable valuation given its position in the semiconductor ecosystem. In terms of shareholder returns, Lam offers a dividend yield of 0.94%. Though the yield is modest, the company has consistently increased its dividend for 10 consecutive years, with a robust 14.9% compound annual growth rate over the past five years. Additionally, Lam is returning capital through share buybacks, highlighted by its $5 billion repurchase program announced in May. Is LRCX Stock a Buy, Sell, or Hold? LRCX earns a Strong Buy consensus rating based on 11 Buys, two Holds, and zero Sell ratings assigned in the past three months. The average LRCX stock price target of $108.75 implies 11.2% upside potential over the coming year. Semiconductor Supply Chain Stocks Offer Long-Term Value I'm bullish on all three of these semiconductor supply chain stocks, as I believe they offer compelling long-term value for investors. Each company plays a critical role in the production of semiconductors that will power transformative technologies such as generative AI, autonomous vehicles, and robotics. Their highly specialized products and services create durable competitive advantages and significant barriers to entry. Yet, despite their strategic importance and strong positioning, all three stocks trade at valuations only modestly above the broader market. Additionally, each company is actively returning capital to shareholders, further enhancing its investment appeal.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store