There is no denying that the recent performance of Intel (INTC) stock has been concerning. Since it debuted its Q2 earnings that underwhelmed investors, the technology company has falted. Tuesday, it started down another 2% at press time to reinforce investor concerns.
The company’s Q3 earnings report is set to arrive on Halloween; there is some optimism for the company. However, there is no denying that they face an uphill battle within the rapidly expanding tech space.
With that being said, here are 4 reasons why you should be worried about Intel stock and the future performance of INTC.
Missed the Boat on AI
Source: Mint
Also Read: Intel: 30 Analysts Predict INTC to Keep Falling in Next 12 Months
Over the last several years, the emergence of AI demand has been undeniable. This is largely due to the meteoric rise of Open AI’s ChatGPT. The generative chatbot was an instant hit, driving consumer interest in similar projects and burgeoning a new era for the sector in mainstream technology.
That success has become a bane for INTC stock. Back in 2017, the company had an opportunity to invest in the GPT development company. However, it ended up passing on the chance. A report states that Intel just didn’t see the vision of generative AI. This fact is even more horrid when considering the success the two sides could’ve had together.
The chipmaker would’ve had an early entry into the development of the industry. Therefore, it could’ve been in the position that NVidia is currently holding as a key developer for semiconductors and chips necessary for language model development.
Although hindsight has proven them wrong, it continues to reinforce concerns over the long-term perception of the industry. The decision to pass on OpenAI has not only diminished its success today but has traders worrying that the company is not aligned with trends that could pay off massively in the near future.
Quality Concerns and Mass Layoffs
Source: CNN
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It isn’t just the AI angle that should be concerning to investors. Recent reports have highlighted worrying details of the company’s fabrication process. Specifically, the unsatisfactory facets of its development process and standards connected with such had led a high-profile partnership with the chipmaker to fall through.
The report noted that Broadcom had sought Intel’s Foundry process node 18A for the manufacturing of chips. Yet, Intel failed to live up to Broadcom’s quality standards. This was incredibly disconcerting for the company. Moreover, it was unfortunate when you considered its competition and companies that may pass up such a partnership and opt for a different manufacturer.
Additionally, Intel announced 15,000 layoffs to come for the company. Specifically, a report notes that they have already begun. The tech firm laid off 1,300 employees from Oregon’s Gordon Moore Park facility, losing 5% of its entire workforce.
These decisions magnify the position Intel was already in. The Q2 earnings and consistently underwhelming has hurt its perception. However, that only gets worse with the influx of layoffs that are taking place at the firm.
Emerging Competition on All Fronts
Source: CNBC
Also Read: Intel (INTC) Q2 Earnings Fuel 19% Drop as Competition Surges
Perhaps the biggest reason for concern over Intel (INTC) health is the wealth of competition emerging. Tech stocks have been immensely popular, with cloud computing and AI dominating investors’ interest. The combination of competitor positions in these industry’s, and Intel’s absence create a perfect storm.
Microsoft, Amazon, Meta, and Alphabet are companies that have all invested billions in the chip development space. That is not to mention the internal struggle of fending off surging companies like Nvidia and Advanced Micro Devices. All of which are vying for market share in the emerging tech space.
The recent concerns about quality have only made it worse for Intel. The belief in Nvidia will have it dominating market interest. Yet, there is no shortage of heavy hitters that are looking to compete with the chipmaker. They are in a prime position to knock INTC out of the way.
The financial data seems to bear this reality out. As many of the aforementioned companies continue to grow their investments, the reality of Intel maintaining its current position becomes all the more questionable. Especially as it has already proven to be lagging behind in the AI space.
New Investigation Only Reinforces Concerns
Credit: Intel Corporation
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Finally, Intel (INTC) concern should stem from a rather shocking investigation opened this week. Chinese security officials have reportedly opened an investigation into the company for chip failures and security concerns. Specifically, a report says the company “threatens national security.”
The investigation is tied to some vulnerabiltiy concerns in the Intel technology. They have accused Intel of adding backdoors for digital espionage, reports suggest. Regardless of the merits of the report or results of the investigation, the timing is worrisome.
The only hope that Intel has right now is in its Q3 earnings. That will in no way be a fix-all, but it could be the first step in the way back to relevancy amid an increasingly crowded stock field. If it can begin attacking many of these concerns, it already has the brand recognition and infrastructure to find its way back. However, there is no shortage of reasons to be concerned with Intel (INTC).
