In Dalian, China, a man is seen riding a scooter in front of Intel Corporation’s wafer fabrication plant, as depicted in a photograph taken on June 26, 2024. This image encapsulates Intel’s current scenario, as the company’s shares (NASDAQ: INTC) have experienced a significant decline of around 38% since the start of the year. In contrast, its competitor AMD has seen a 17% increase in stock value over the same period. Investors are cautiously observing Intel’s outlook amidst concerns over its ability to navigate the era of generative AI and its plans to become a prominent player in the foundry market.
The rise of generative AI poses challenges for Intel’s server business, with a shift towards custom-built graphics processors favored for AI-heavy workloads rather than central processing units. This trend, along with the competition from companies like Nvidia using ARM chips, poses challenges for Intel’s market position in AI computing. Additionally, the client side of Intel’s business faces threats from emerging competitors like ARM and Qualcomm, who are making strides in the PC chip market.
Intel is striving to establish a stronger presence in the AI domain with its Gaudi 2 and Gaudi 3 accelerators targeting data center AI workloads. The company is emphasizing competitive pricing and performance metrics to appeal to customers in this sector. However, Intel faces hurdles in catching up with market leaders like Nvidia in terms of overall AI computing performance.
Apart from AI, Intel is focusing on becoming a major foundry player by producing chips for other semiconductor companies, but challenges persist due to Intel’s past production missteps and trailing manufacturing technology. The company reported an operating loss in its manufacturing division in 2023 and faces difficulties in breaking even until 2027. This endeavor raises concerns among potential customers regarding chip design intellectual property and strategic alignment with Intel.
Despite its challenges, Intel could see a positive trajectory with the recovery of the PC market post-COVID and increased investment interest in its manufacturing capabilities. The company’s valuation is considered reasonable, with potential for growth as it navigates the evolving technological landscape.
In summary, Intel is at a critical juncture as it addresses challenges in AI computing, foundry operations, and market competition. The company’s strategic initiatives and market conditions will play a significant role in shaping its future performance and stock value. Investors are closely monitoring Intel’s progress and industry dynamics to assess its potential for growth and competitiveness in the evolving tech landscape.
Article Source
https://www.forbes.com/sites/greatspeculations/2024/07/02/will-intels-ai-and-foundry-bets-reverse-the-stocks-38-slump-this-year/