Intel stock has taken a beating on Friday trading after it issued first-quarter guidance that fell below market expectations following strong fourth quarter earnings performance.
Intel stock still holds considerable growth potential despite this setback, as inflation-based PC market recovery gains momentum and the company expands its AI business. But before investing, investors must carefully assess both risks and opportunities before buying shares.
Intel’s outlook for the first quarter of 2024 was a disappointment
Intel Corporation is a premier digital chipmaker. As the creator of the x86 architecture for microprocessors and the primary proponent of Moore’s law for advances in semiconductor manufacturing, they were instrumental in shaping semiconductor technology’s progress over time. Though their core business remains personal computer and data center processors, Intel has expanded into other sectors including communications infrastructure, automotive production, Internet of Things applications as well as providing outsourced foundry capabilities so others can construct chips using Intel manufacturing capabilities.
Intel is anticipating its revenue to suffer during the first quarter of 2024 due to weakness at some of its subsidiaries, most notably Mobileye and Programmable Microchip Sales are expected to take a hit.
Intel has had an impressive showing since emerging from its PC business slump; meeting Wall Street earnings expectations during Q4 last year, as evidenced by an excellent quarter 4 performance and beating expectations in earnings in Q1. But their early 2024 outlook represents another obstacle they’ll need to navigate successfully.
The chip industry is in a downturn
Intel is a pioneer of microprocessor technology, but its future remains unclear. Recently, it has cut costs, reduced workforce levels and spun off or sold parts of its business such as self-driving car chipmaker Mobileye.
The chip industry is experiencing a dip, with sales expected to decrease 9% this year. Memory chips have taken the hardest hit due to falling demand from PCs and smartphones; other markets such as logic and image sensor chips may experience small gains.
As it remains uncertain how long Intel’s downturn will continue and whether memory and other chips demand will pick up again this year, investors should reduce their exposure to Intel stock and consider investing in an alternate semiconductor contract manufacturer like United Microelectronics instead; that way, you can benefit from any recovery in the chip market without fearing its effect on Intel revenue.
Intel’s artificial intelligence business isn’t performing as well as expected
Intel Corporation’s stock has experienced considerable volatility recently due to a revenue shortfall from its AI business unit, as reported by Intel’s AI Business Unit. Intel has shown some improvement across other aspects of business performance and appears poised for long-term growth opportunities.
Intel’s Data Center and Artificial Intelligence division saw its sales drop significantly sequentially during its first quarter, which was disappointing, though both CFO David Zinsner and CEO Pat Gelsinger explained this was seasonal. They expect growth later this year.
Investors remain wary about how the slowdown in global economy may wreak havoc with Intel, who has faced rising competition from companies like ARM who utilize designs that consume less power and take up less space than its own designs. With these headwinds likely remaining for some time, it would be wise for investors to remain cautious with their portfolios.
Intel’s stock is up 48% over the past year
Intel shares have seen an amazing 48% spike in one year as investors place their hopes in its turnaround in PC sales and its new foundry strategy to manufacture chips for other companies. But this rally may have gone too far.
Chipmaker Intel’s 2024 forecast provides plenty of room for errors, and investors appear less optimistic that its artificial intelligence push can increase sales.
Intel still boasts some attractive growth drivers, such as its foundry business and chip design efforts. Their Emerald Rapids Xeon processors and Meteor Lake mobile CPUs have outpaced AMD products in some categories.
Intel could soon convince investors that its revived chip business is finally taking off, offsetting slower revenue growth from PC and data center segments. However, until that occurs, Intel remains vulnerable to market decline. Click here for instant access to our list of 10 stocks we think would make better buys than Intel.
- Friday Intraday Trading Sees Nvidia’s stock Market Cap Momentarily Cross $2 Trillion
- Trump’s January 6 Civil Cases Proceed While Criminal Case Is Halted
- Trump Delivers Speech at the Columbia Black Conservative Federation Gala
- Trump Declares Strong Support for IVF Following Alabama Supreme Court Decision
- Schumer in Ukraine Declares US Backing During House Aid Standoff
