Let's summarize the reasons why INTC is at the current price:
- – Lagging behind in technology
- – Poor track record of management
- – In the middle of a pivotal moment in their history
- – Losing market share in most segments
- – Record low profits amid market saturation and supply chain issues
- – Their AI portfolio misses most of the AI golden rush
- – Alternative architecture ARM is customizable and this spiked in demand these days
Still, let's underline some facts:
Market valuation landscape:
- – Up in the value chain, the only competitor is AMD. AMD is 5 times smaller in size, yet has bigger market cap. And remember AMD outsources its fabs, with this info alone you can estimate that the apples-to-apples difference in valuation is 25-fold.
- – In the fab front, TSMC is valued 5 times higher than Intel. For reference it has 40% less employees.
Strategy:
Currently everything depends on whether INTC will pull out two moves successfully:
- – Transitioning to a third party fab model (partly becoming another TSMC)
- – Catching up to TSMC's tech
They have plenty of resources to do that, however it will not be done overnight and the clock is ticking.
Everything else (mobile processors, graphics cards, AI) is important and on the right track, but they are secondary and we shouldn't worry too much.
Management:
The CEO is the best they had in a decade by far. CEO is committed to the new strategy, and made INTC lead efforts in supply chain stability, which should not be understated, as this is of high strategic value for countries and partners alike.
If they execute their strategy swiftly, they will be at least remotely comparable to their rivals in market valuation. If they hit several bumps, the current valuation would not seem overvalued.
We already have positive things to say about their execution:
- – They secured preferential treatment from ASML for next gen litography ahead of what TSMC can do.
- – They approached the 10 biggest clients in the fab business and some already jumped in the bandwagon. Some, like NVIDIA, gave signs they are likely to join.
- – 25% of their Xeon are used for AI workloads and have competitive offers in graphics cards.
- – I noticed that the satisfaction regarding Intel-branded products has increased lately, due to competitors becoming greedy with their last successes.
Irrational fears:
- – The fear that AMD will leave INTC in the dust due to the rapid growth of their market share:
Hey, it's one thing to believe that catching up is gonna make the parity even, and it's a completely different thing to defend that AMD has some kind of superpower or INTC an unforgiveable defficiency that will lead to an uneven outcome over the long term. 50-50 seems natural.
- – Intel performance disappointed me / I had losses with this stock:
Relatable, but it's not wise to make decisions on these terms.
Ngl, this is a long game, but it doesn't look like a bad starting position, especially if we consider the already saturated alternatives.
Leave a Reply