Latest news with #18A
Forbes
9 hours ago
- Business
- Forbes
How Intel Stock Falls To $10
Intel stock (NASDAQ:INTC) has barely moved this year, up just 2%, as the company continues to struggle with shrinking relevance in its core CPU market and underwhelming progress in its foundry ambitions, despite investing over $50 billion in the space. Revenue has collapsed from $79 billion in 2021 to $53 billion in 2024. While the broader PC market is showing signs of stabilization, Intel's top line is projected to decline again this year - suggesting revenue stagnation could become the norm. Meanwhile, stocks of competitors like AMD and Nvidia are soaring, up 43% and 24% respectively in 2025. Could Intel stock plunge to $10 - half its current value? It may seem extreme, but given the steady erosion of its fundamentals, it's no longer unthinkable. Below, we provide a scenario considering three key metrics, namely revenues, net margins, and price-to-earnings multiple. That said, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception. SANTA CLARA, CA - JULY 15: An Intel sign is displayed in front of the Intel company headquarters ... More July 15, 2008 in Santa Clara, California. Intel has reported a 25 percent increase in its second quarter earnings with net income of $1.6 billion or 28 cents per share compared to $1.28 billion, or 22 cents per share one year ago. (Photo by) Revenues Could Stagnate Intel's sales have declined considerably of late. Intel revenues declined from $79 billion in 2021 to $53 billion in 2024 as Intel's CPU sales declined due to the cooling off of the PC market post-Covid-19, and also due to market share gains by rival AMD. The rise in mobile devices and increasing demand for AI chips - areas where Intel has a limited presence - have also hurt. While the PC market is recovering with sales projected to grow by low single-digits this year, Intel's revenues don't look like they will stabilize just yet, with consensus estimates projecting a 2% dip in sales this year. There remains a possibility that Intel could see its revenues stagnate in the interim due to a host of factors. While Intel struggles, Will AGI Take Nvidia Stock To $300? Foundry business may not be taking off: There's are increasing signs that Intel's foundry bet isn't taking off the way the company had expected. During its most recent earnings call, Intel appeared to play down hopes of winning major external customers for its 18A process - its most advanced manufacturing tech to date - with the leadership noting that 18A will primarily be used for internal products to begin with. Intel also said in its quarterly filing that it could potentially 'pause or discontinue' its next-generation 14A process if it was unable to win a significant customer. However, the market for foundry services is actually booming. Taiwan's TSMC - the world's largest foundry player - sees its AI-related chips revenue doubling in 2025 and rising at a mid-40% levels over the next five years. Intel, on the other hand, is witnessing very little of the action. CPU market share losses: Intel's CPU business could face further pressure, despite new launches, as the generative AI era could open the doors to more competition as PC makers look to incorporate more smarts into their devices. For instance, both chip-designer ARM and mobile chipset specialist Qualcomm are pushing into the PC space and Microsoft's latest Copilot+ PCs use ARM chips that offer AI features and consume less power. On the server front too, there could be challenges as accelerated computing servers used for generative AI applications typically require just one CPU for eight or more GPUs in AI servers. Moreover, GPU makers such as Nvidia are playing a bigger role in overall server system design, looking to replace dedicated CPUs from the likes of Intel with lower-powered ARM chips instead of Intel's. This could impact Intel's bread-and-butter CPU business. Foundry utilization dilemma: Intel also faces a dilemma of sorts. While competitors like AMD and NVIDIA use TSMC's superior, cutting-edge manufacturing processes, Intel must balance product competitiveness with the financial health of its own costly foundries. Intel has already been sending some chip orders TSMC's way in recent years for crucial components of some of its recent processors. While this outsourcing boosts Intel's product performance, it simultaneously starves its internal manufacturing division of crucial orders needed to cover fixed costs. This forces Intel into a difficult choice: risk using its own possibly less advanced fabs and falling behind rivals in the CPU game, or undermine its internal foundry operations by further embracing TSMC. Intel is clearly on the back foot. While the company is keen to build momentum - employee morale can't be high either. Customers and buyers are more likely to want the 'best' and if the word on the street is that Intel isn't the 'future' - it's less likely to be the choice 'now.' Everything becomes just a tad harder. Intel revenues are projected at about $52 billion for this year per consensus estimates and there is a possibility that sales could remain flat in the coming years, due to the aforementioned factors. Margins Fall Further? Intel's adjusted net margins (net income, or profits after expenses and taxes, calculated as a percent of revenues) have been on a declining trajectory - they fell from levels of over 28% in 2021 (and in years before that) to just about 8.5% in 2023 due to sales declines and considerable losses in the foundry business. The metric fell to negative levels in 2024 as Intel posted losses. While the markets are likely betting that Intel's margins could eventually expand to historical levels as it sets its product and manufacturing roadmap in order, there remains a possibility that margins could remain depressed, remaining at about 5% levels in 2025. Costs associated with the foundry ramp-up could hurt Intel's bottom line. Moreover, Intel's move to outsource production of its Arrow Lake chip to TSMC could potentially reduce the utilization of its own manufacturing facilities. Intel has also not exactly been known for production efficiency. For perspective, in 2023, Intel's foundry business reported an operating loss of $7 billion on sales of $18.9 billion. Separately, higher competition in the CPU space - where new entrants such as Qualcomm and ARM - might also force Intel to resort to some amount of discounting. How This Impacts Intel's Stock Now at the current market price of about $20 per share, Intel trades at about 160x estimated 2025 earnings and about 1.7x consensus revenue. Since Intel was unprofitable in 2024, let's ignore the P/E multiple for this year. In 2023, Intel traded at about 19x. So what explains the difference in Intel's P/E multiple using 2023 and 2025 earnings? It's because investors are betting that things will get better going forward. However, if Intel doesn't deliver in the interim, investor sentiment could go further downhill. If we combine the scenario we detailed above - which assumes no meaningful annual revenue growth between 2025 and 2027 with adjusted net margins falling to about 5% - this means that adjusted net income could fall from about $4.4 billion in 2023 ($1.05 per share) to about $2.5 billion in 2027 ($0.58). Bad times make it easier to imagine worse times - and when that happens, things can spiral causing investors to assign an even lower multiple to Intel re-assessing Intel's recovery path. For example, if Intel's investors assign a multiple of 18x to Intel, following its continued underperformance, this would translate into a stock price of just about $10 per share. What about the time horizon for this negative-return scenario? While our example illustrates this for a 2027 timeline, in practice, it won't make much difference whether it takes two years or four. If the competitive threat plays out, with Intel also continuing to struggle with manufacturing, we could see a meaningful correction in the stock. While you would do well to be careful with INTC stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
Economic Times
4 days ago
- Business
- Economic Times
Intel slumps as potential foundry exit deepens investor gloom
Intel shares sank 8% on Friday after the company warned of exiting chip manufacturing if it fails to secure a major customer, a potentially drastic move by the new CEO to cut spending and revive the struggling American icon. Lip-Bu Tan said on Thursday he would further shrink Intel's workforce, halt work on two plants in Europe and slow another in Ohio, binning his ousted predecessor's strategy that relied on building costly facilities to restore its manufacturing edge. The plan for such extreme measures follows a surprise second-quarter adjusted loss and a forecast for a bigger-than-expected loss in the third quarter. The weakening financials pointed to more trouble for Intel after years of mismanagement eroded its PC and datacenter market share and left it with almost no presence in the AI market. The disclosures "revive long-unanswered questions on the chances of success for its foundry business the path forward is if Intel does not develop leading edge manufacturing capability," TD Cowen analyst Joshua Buchalter said. "It's hard to understate the significance of this potential outcome in the context of the history of the semiconductor industry." As part of its new strategy, Intel may reserve the advanced 18A manufacturing process for its products and proceed with its next-generation 14A only if it lands a major external customer commits, Tan told analysts on the post-earnings call. The move could put $100 billion in assets at risk and deepen its dependence on rival TSMC, adding strain to margins already running at about half their historical highs. "Intel Foundry is a big story and currently people are questioning how successful 18A is. A failure in 18A will be a broken story," said Hendi Susanto, portfolio manager at Gabelli Funds. Intel was set to lose nearly $8 billion in market value, if current losses hold. Its current valuation of around $100 billion is less than half of Advanced Micro Devices' more than $260 billion. The stock has lagged far behind rivals this year, rising 12.8% compared with AI darling Nvidia's 30% gain and AMD's 34%. Intel trades at a 12-month forward price-to-earnings ratio of 42.55 versus 33.90 for Nvidia and 32.12 for AMD. Since taking the helm in March, Tan has divested businesses, laid off employees and redirected resources as part of his strategic reset to revive the embattled chipmaker. "There are no more blank checks," he wrote in a memo to employees on Thursday.
Business Times
4 days ago
- Business
- Business Times
Intel slumps as potential foundry exit deepens investor gloom
[NEW YORK] Intel shares sank 8 per cent on Friday (Jul 25) after the company warned of exiting chip manufacturing if it fails to secure a major customer, a potentially drastic move by the new CEO to cut spending and revive the struggling American icon. Tan Lip-Bu said on Thursday he would further shrink Intel's workforce, halt work on two plants in Europe and slow another in Ohio, binning his ousted predecessor's strategy that relied on building costly facilities to restore its manufacturing edge. The plan for such extreme measures follows a surprise second-quarter adjusted loss and a forecast for a bigger-than-expected loss in the third quarter. The weakening financials pointed to more trouble for Intel after years of mismanagement eroded its PC and datacentre market share and left it with almost no presence in the AI market. The disclosures 'revive long-unanswered questions on the chances of success for its foundry business the path forward is if Intel does not develop leading edge manufacturing capability,' TD Cowen analyst Joshua Buchalter said. 'It's hard to understate the significance of this potential outcome in the context of the history of the semiconductor industry.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up As part of its new strategy, Intel may reserve the advanced 18A manufacturing process for its products and proceed with its next-generation 14A only if it lands a major external customer commits, Tan told analysts on the post-earnings call. The move could put US$100 billion in assets at risk and deepen its dependence on rival TSMC, adding strain to margins already running at about half their historical highs. 'Intel Foundry is a big story and currently people are questioning how successful 18A is. A failure in 18A will be a broken story,' said Hendi Susanto, portfolio manager at Gabelli Funds. Intel was set to lose nearly US$8 billion in market value, if current losses hold. Its current valuation of around US$100 billion is less than half of Advanced Micro Devices' more than US$260 billion. The stock has lagged far behind rivals this year, rising 12.8 per cent compared with AI darling Nvidia's 30 per cent gain and AMD's 34 per cent. Intel trades at a 12-month forward price-to-earnings ratio of 42.55 versus 33.90 for Nvidia and 32.12 for AMD. Since taking the helm in March, Tan has divested businesses, laid off employees and redirected resources as part of his strategic reset to revive the embattled chipmaker. 'There are no more blank checks,' he wrote in a memo to employees on Thursday. REUTERS
The Star
4 days ago
- Business
- The Star
Intel shares slide on quarterly loss, foundry business exit risk
FILE PHOTO: A smartphone with a displayed Intel logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/ File Photo (Reuters) -Intel shares fell 5% in premarket trading on Friday after the chipmaker forecast steeper-than-expected quarterly losses and warned of a potential exit from its foundry business despite new CEO Lip-Bu Tan's turnaround plans. Tan on Thursday hinted at departing from ex-CEO Pat Gelsinger's core strategy, warning that without demand-backed investment, Intel risks exiting the foundry business, jeopardizing $100 billion in assets and increasing its reliance on TSMC. As part of its foundry business reform, the company may reserve the advanced 18A manufacturing process for its products and proceed with 14A only if a major external partner commits, Tan stated in a post-conference call. "Intel Foundry is a big story, and currently people are questioning how successful 18A is. A failure in 18A would be a broken story," said Hendi Susanto, portfolio manager at Gabelli Funds. Intel also halted or scrapped several fab projects in the U.S. and Europe, citing financial discipline. Once a leader in American chipmaking, Intel has lost ground after years of strategic missteps, lagging far behind rivals Nvidia and Advanced Micro Devices. The company's stock has gained 12.8% so far this year, while Nvidia and AMD have jumped about 30% and 34%, respectively. Since taking the helm in March, Tan has divested businesses, laid off employees and redirected resources as part of his strategic reset to revive the embattled chipmaker. "There are no more blank checks," Tan wrote in a memo to employees on Thursday, announcing further job cuts as Intel aims to reduce its workforce by 22% to 75,000 by year-end. "I don't think he's scaling back… I think they're maybe redirecting. I would prefer them to build it out, but only if they have customer commitments," said Ryuta Makino, analyst at Gabelli Funds, who's also an Intel shareholder. Intel trades at a 12-month forward price-to-earnings ratio of 42.55 versus 33.90 for Nvidia and 32.12 for AMD. (Reporting by Rashika Singh and Arsheeya Bajwa in Bengaluru, Samuel Indyk in London; Editing by Amanda Cooper and Vijay Kishore)
Time of India
4 days ago
- Business
- Time of India
Intel's foundry future depends on securing a customer for next-gen chipmaking tech
By Max A. Cherney and Stephen Nellis SAN FRANCISCO: Intel warned investors on Thursday that it may have to get out of the chip manufacturing business if it does not land external customers to make chips in its factories. New CEO Lip-Bu Tan said on Thursday the company's engineers were busy working with customers to jump-start its next-generation contract manufacturing process, or foundry, as the company announced big layoffs alongside a wider-than-expected third-quarter loss outlook. Those customers for the company's so-called 14A manufacturing process are crucial to the success of the technology - so much so that if it fails to secure a big one, it could shut down its cutting-edge manufacturing business altogether, according to Intel's quarterly filing on Thursday. The possibility that Intel could drop out of the cutting-edge manufacturing business would be a historic shift for a company that has described itself as a steward of Moore's Law - an observation by Intel co-founder Gordon Moore about the fast rate of development of the chip industry that held true for decades. Intel is the only U.S. chipmaker capable of making advanced computing chips. Intel has struggled for years due to management missteps, missing out on the AI race and losing market share to its longtime rival AMD . Former CEO Patrick Gelsinger poured money into Intel's foundry business, aiming to compete with chip manufacturing giant TSMC . Tan, who has already taken steps to right the ship, said on a post-earnings call on Thursday that he was personally reviewing all chip designs and investments. "We're developing Intel 14A ... from the ground up in close partnership with large external customers," Tan said in a memo released with the results. "Going forward, our investment in Intel 14A will be based on confirmed customer commitments. "We will build what our customers need, when they need it, and earn their trust through consistent execution." Intel said that without a significant customer, it would consider cancelling or pausing development of 14A and subsequent technologies. Should the company take the step, it planned to continue to manufacture chips with its 18A technology and a variant through 2030, according to the filing. In a post-earnings conference call, Tan said on Thursday that he is focused on working with customers to ensure 14A is a success and that tight collaboration with external customers is something that was absent from the company's 18A, which is set to go into high-volume production later this year. Tan said bringing those prospective customers in and gaining their feedback during 14A's development has already made it more promising than 18A. "That gave me a lot more confidence that this time, we have customers (that) are engaging early enough in the inception" of 14A, Tan said. "We learn from our mistakes, and we can learn quicker and then get a better result." The consequences of a decision to halt internal manufacturing would be significant for Intel, the filing said. It would mean that over time, Intel would become dependent on Taiwan's TSMC for contract manufacturing, or foundry, services. Doing so would also put it at a competitive disadvantage to competitors such as AMD, which has longer relationships and experience working with TSMC. Intel had roughly $100 billion of chipmaking equipment as of June 28. If the company halted its 14A manufacturing line, the company expects "significant material impairments" related to the company's foundry assets, the company's filing said.
