Intel Stock Surge: Is the Turnaround Real?

Intel (INTC) stock has surged 30% since February 7, reclaiming its 200-day moving average for the first time in 10 months. However, over the past year, it has plummeted 41%, significantly underperforming major semiconductor peers like NVIDIA (NVDA) and TSMC (TSM) due to several fundamental challenges.

https://360miq.com/tool?code=INTC,NVDA,TSM&tf=w&from=2024-02-21&to=

Why Intel Stock Has Underperformed for Years:

1. Manufacturing Delays & Losing Process Node Leadership
   • Intel struggled with delays in transitioning to 7nm and 10nm chips, falling behind TSMC and Samsung, which produced more advanced chips (5nm, 3nm).
   • This allowed competitors like AMD (using TSMC’s advanced nodes) to take market share in CPUs.
     
2. Loss of Server & Data Center Market Share
   • Intel’s Xeon server chips faced strong competition from AMD’s EPYC processors, which offered better performance and efficiency.
   • Cloud companies (AWS, Google, Microsoft) started designing their own ARM-based chips, reducing reliance on Intel.
     
3. Failure in GPU & AI Markets
   • NVIDIA dominated the AI and GPU space, while Intel struggled to develop competitive discrete GPUs.
   • AMD and NVIDIA gained traction in AI and gaming, leaving Intel with little presence in these fast-growing areas.
     
4. Apple Ditching Intel for In-House Chips
   • Apple moved from Intel CPUs to its own M1/M2/M3 ARM-based chips, reducing Intel’s revenue from MacBooks and iMacs.
     
5. Leadership Instability & Strategic Missteps
   • Intel went through several CEO changes and inconsistent strategies (e.g., failed Optane memory business and exiting smartphone chips).

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Why Intel Has Been Performing Well Recently:

1. U.S. CHIPS Act & Geopolitical Tailwinds
   • Intel is receiving billions in subsidies from the U.S. government over the past 6 months to boost domestic semiconductor manufacturing, positioning it as a leader in onshore chip production.
   • U.S.-China tensions and efforts to onshore chip production favor Intel’s foundry ambitions. TSMC faces risks in Taiwan, while Intel’s U.S./EU fabs are seen as strategic assets.
     
2. Process Node Roadmap
   • Plans to mass-produce Intel 18A (1.8nm) chips by 2025 could bring it back to the cutting edge.
     
3. Expansion into Foundry Business (Intel Foundry Services – IFS)
   • Intel is aggressively investing in its foundry business to compete with TSMC and Samsung, securing major customers like Microsoft, Amazon, and the U.S. military.
   • The recent deal with Tower Semiconductor strengthens its foundry capabilities.
     
4. AI & High-Performance Computing (HPC) Investments
   • Intel launched Gaudi 2 and Gaudi 3 AI accelerators, targeting AI workloads and competing with NVIDIA’s H100 chips.
   • New AI-enabled Meteor Lake and Lunar Lake laptop chips could drive future growth.
     
5. Strong Valuation
   • Intel seems to be forming multiple bottoms at an attractive price-to-book ratio in the Price/Book Band below.

https://360miq.com/stockinfo?code=intc#tab-3

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Conclusion

Intel’s fundamental and Technical are improving, but challenges remain. Key factors to watch:

• 1. Successful execution of Intel 18A process and manufacturing roadmap
• 2. Growth in AI and data center chips
• 3. Success in foundry business against TSMC
• 4. Stabilization in server and data center market demand

If Intel delivers on its manufacturing turnaround and AI strategy, it could regain some of its former strength. However, competition is still intense, and execution risks remain. Nevertheless, the short-term outlook is improving due to its attractive book value and recovery above the 200-day moving average.