Why Intel Stock Kept Going Down Today
According to a Wall Street Journal that appeared in print this morning, Intel (NASDAQ: INTC) stock is too big to fail. Based on trading today, investors aren’t so sure about that.
Shares of the once-upon-a-time semiconductor king slipped 2% through 1:45 p.m. ET on Monday, extending an almost uninterrupted slide in share price since the company’s disastrous second-quarter earnings report that has cost the stock 37% in just a little over a week and a half.
What the WSJ says about Intel
In the column, the Journal argued that while Intel will take a long time and a lot of money to turn itself around, its recovery is inevitable for several reasons. First and foremost, the company has factories that are actually worth more than the stock currently sells for, and these are “key to Intel’s staying power.”
The importance of semiconductors to modern life and modern economies, says the Journal, means the U.S. government cannot allow Intel to fail as a business. The publication points to the 2022 Chip Act passed by Congress, and the $8.5 billion in subsidies that the government awarded to Intel to assist it in building new chip factories in Arizona and Ohio.
Although these factories aren’t currently running at full capacity (a big reason Intel’s earnings missed by so much), the Journal says that Intel could fill out their capacity if it either figures out a way to compete with Nvidia (NASDAQ: NVDA) in artificial intelligence chips, or farms out unused capacity to other chipmakers as a foundry (or contract chipmaker).
Is Intel stock a buy?
The problem for Intel, and for its investors, is that whichever of these tracks Intel takes, the strategy will take time to succeed.
In the meantime, investors must resign themselves to owning a second-tier chipmaker with an operating profit margin worse than any of the companies it has to compete with: AMD (NASDAQ: AMD) at 4.6%, Taiwan Semiconductor Manufacturing (NYSE: TSM) at 42.6%, or Nvidia at 64.9%.
With numbers like these, it’s hard to call Intel stock a buy.
Should you invest $1,000 in Intel right now?
Before you buy stock in Intel, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Intel wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $641,864!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 12, 2024
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
Why Intel Stock Kept Going Down Today was originally published by The Motley Fool
