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

Business Insider

19-07-2025

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.
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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.