Intel Stock Plunges 60% in 2024: What Went Wrong?

Intel's stock price has taken a nosedive in 2024, plummeting by a staggering 60%. The once-mighty chipmaker has faced a perfect storm of challenges, from missed analyst expectations to intense competition in the AI market. Let's dive into the factors that contributed to Intel's stock price decline and explore whether there's any hope for a turnaround.

Missed analyst targets and weak guidance

Intel's financial performance in 2024 has been a mixed bag, with the company missing analyst revenue and earnings targets as often as it exceeded them. The upcoming fourth-quarter report is expected to show far weaker results than the year-ago quarter, further dampening investor sentiment. Intel's guidance for the third quarter was also lower than expected, with the company forecasting a loss per share of $(0.24) for the period.

Rivalry in the AI market

Intel's main competitor, Nvidia, has been running away with the juiciest chip-supply deals in the booming AI market. Meanwhile, longtime underdog Advanced Micro Devices (AMD) has earned a historically large slice of important opportunities, such as server-grade chips and PC processors. This intense competition has put significant pressure on Intel's market share and stock price.



Shareholder patience wears thin

Some of Intel's largest shareholders have run out of patience with the company's long and expensive turnaround effort, forcing CEO Pat Gelsinger out of the company. This lack of confidence from shareholders has contributed to the stock price decline. Intel is currently running under an interim management team, which may have created uncertainty and impacted investor confidence in the company's direction.

Large business expenses

Intel is spending as much as $100 billion on a five-year plan to support its third-party semiconductor manufacturing services for other chip designers. These large expenses, combined with the challenges mentioned above, have put significant pressure on Intel's stock price. In the third quarter of 2024, Intel reported a $16.6 billion loss due to massive impairment and restructuring charges, including $15.9 billion of impairment charges and $2.8 billion of restructuring charges.

Interim management team and strategic shift

Intel is currently in the middle of an ambitious, costly, and difficult strategy shift, which may have contributed to uncertainty and a lack of confidence among investors. The company is spending as much as $100 billion on a five-year plan to support its third-party semiconductor manufacturing services for other chip designers. This strategic shift, combined with the challenges mentioned above, has put significant pressure on Intel's stock price.

What's next for Intel stock?

Intel's stock price has taken a beating in 2024, but there are reasons to be optimistic about the company's long-term prospects. The American government is subsidizing a massive Intel fab outside of Columbus, Ohio, as part of $8.5 billion in loans and grants toward U.S. chipmaking. This investment could help Intel become the American producer of AI chips, potentially even for its rivals.

Moreover, Intel's stock trades at a bargain-bin valuation of 1.6 times sales or 20.3 times forward earnings estimates. This valuation is significantly lower than its competitors, such as AMD, Taiwan Semiconductor Manufacturing, and Nvidia. If Intel can successfully navigate its current challenges and execute on its strategic plan, the stock price could multiply several times over and still look cheap in this group.

In conclusion, Intel's stock price has plummeted in 2024 due to a combination of missed analyst targets, intense competition in the AI market, shareholder impatience, large business expenses, and an interim management team. However, the company's long-term prospects remain promising, and investors who are willing to take a chance on Intel could be rewarded if the company can successfully execute on its strategic plan. As always, it's essential to do thorough research and consider your risk tolerance before making any investment decisions.