Intel (INTC) has found itself in a world of trouble in 2024 after years of innovation failures left it significantly lagging behind its peers. A lot has happened in recent months, and there are many more developments possible before the end of the year. Interestingly, analysts still see the business recovering to the extent that the stock becomes quite affordable compared to peers in upcoming years. Despite this, I’m concerned the company will struggle to catch up, and as such, I’m neutral on INTC.
What Happened at Intel?
Intel remains a global chip giant, with operations in both the design and manufacturing of chipsets. However, the decline from its once-dominant position in the semiconductor industry is evident, and can be attributed to a variety of factors that have unfolded over the past decade. Those pressures continue, and so I have a neutral rating on the stock.
The company’s struggle to maintain its technological edge began around 2015 when it simply stopped innovating as quickly as its peers. As the innovation cycles failed to deliver material improvements and other companies transitioned to smaller, more efficient chip manufacturing processes, Intel continued making profits as it produced its less advanced chips en masse.
This lack of innovation eventually caught up with Intel. The company’s reliance on its x86 architecture also left it vulnerable as the industry shifted towards more energy-efficient ARM-based (ARM) designs, particularly in mobile and emerging artificial intelligence (AI) applications. Intel’s weaknesses were laid bare during the pandemic as supply chain disruptions and increased demand for computing power highlighted the company’s manufacturing limitations.
Intel’s Catch-Up Strategy
In response to falling behind, Intel brought in CEO Pat Gelsinger in 2021 to spearhead a turnaround strategy, which included massive investments in new fabrication facilities and a renewed focus on technological leadership.
Gelsinger kicked things off by announcing his ambitious “five nodes in four years” strategy, with the aim of rebounding…
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