The road ahead for struggling Intel (INTC) is uncertain at best as its stock hovers near record lows.
Intel faces an “uphill battle” to turn itself around and compete with the likes of Nvidia (NVDA), AMD (AMD), and Taiwan Semiconductor (TSM), Goldman Sachs analyst Toshiya Hari told Yahoo Finance at the Goldman Sachs Communacopia & Technology Conference on Monday.
Hari rates shares of Intel as Sell. He thinks the company will need some time to get its technology —notably AI chips — on par with its better-performing rivals, if they can do it at all.
Goldman’s bearish take on Intel — while having Nvidia on its closely watched conviction buy list — comes at a precarious time for the company.
Intel widely missed second quarter analyst estimates on sales, gross profit margin, and earnings as it encountered more challenging market conditions and higher-than-expected costs to ramp AI chip production.
The company took the drastic action of suspending its dividend, which will go into effect in the fourth quarter. Intel has paid a dividend for 125 straight quarters previously, including $3.1 billion in 2023.
Intel said it would slash 15% of its workforce to get costs under wraps.
“This is the biggest restructuring of Intel I’d say since the memory microprocessor decision four decades ago,” Intel CEO Pat Gelsinger told Yahoo Finance following the results in early August.
Gelsinger says he’s in it for the long haul despite being disappointed in the quarter and outlook.
“This is what I signed up for [when I came in as CEO],” Gelsinger added.
Gelsinger is reportedly exploring an IPO of Intel’s chipmaking business Altera and a possible sale of its foundry business to shore up investor confidence.
Intel’s stock is down by about 50% in the past year. By comparison, shares of Nvidia and AMD are up 132% and 30%, respectively.
“From a company fundamental perspective, the company is facing tough macro headwinds and a highly competitive compute environment exacerbated by lingering questions on its ability to execute on its technology/product/diversification road maps,” JPMorgan analyst Harlan Sur said in a recent client note.
Sur — who rates Intel’s stock at Underweight (Sell equivalent) — added, “Given the market has time to gain confidence in Intel’s ability to execute in its core compute and diversification initiatives, we believe INTC will be an underperformer relative to the group over the next 12-18 months.”
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Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
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