Intel’s recent performance is just like observing a tech giant who is wobbling in slowly while the rest of the industry runs past it. The falling margins, flat revenues, and constant losses in its foundry business hints that Intel is attempting to remake itself, but the process is expensive and is taking a long time. Yes, it’s getting in the AI race and attempting to save money, but so far the results haven’t really instilled much confidence.
Intel’s Q2 figures reveal that it is spending heavily on its future at the expense of compromising its results currently. Growth from the data center and AI is running behind Nvidia, which have already secured substantial market share. Despite some positives, the 20% growth in business lines such as Mobileye, Intel’s core businesses are lagging behind.
In spite of all these worries, the firm is leaning on its 18A process and is wagering on becoming a competitive foundry for others. This is a high-risk and a high-capex approach. This suggests pressure along with scaling back of ambition. The fact that the company only trades a little bit above its tangible book value is an indication that investors are pricing the company more for assets than for its growth possibilities.
Intel’s dominance days are gone, and the world of semiconductors has evolved. AMD and Nvidia have taken the lead, and Intel is trying to catch up in an AI world that races with lightning speed. Intel has been in this position before. Its decades of history, real assets, and sheer magnitude of its infrastructure make it impossible to ignore and let go of it entirely. If management performs well and AI adoption takes hold, the turnaround might catch everyone by surprise.
At 1.2x tangible book value, Intel is inexpensive from a balance sheet point of view. If the foundry business catches up or Intel derives more value from byproducts or alliances, the stock could provide good upside, even without spectacular growth. Intel is in between reinvention and relevance.
The potential is definitely there, but the danger that the turnaround never actually comes also persists. Investors monitoring Intel have to decide whether they think the plan will work, or whether the company’s greatest days have already passed.
