According to a Wall Street Journal which appeared in the printing press this morning, Intel (NASDAQ:INTC) The stock is “too big to fail.” Given today’s trading results, investors are not so sure.
Shares of the former semiconductor king lost two percent by 1:45 p.m. Eastern Time on Monday, continuing an almost uninterrupted slide since the company’s disastrous second-quarter earnings report, which saw the stock’s value fall 37 percent in just over a week and a half.
What the WSJ says about Intel
In the column magazine argued that while Intel will take a long time and will have to invest a lot of money to recover, its recovery is inevitable for several reasons. First and foremost, the company has factories that are actually worth more than its stock is currently trading at, and these are “the key to Intel’s staying power.”
The importance of semiconductors for modern life and the modern economy, says the magazinemeans that the U.S. government cannot allow Intel to fail as a company. The publication points to the Chip Act 2022 passed by Congress and the $8.5 billion in subsidies the government has given Intel to help the company build new chip factories in Arizona and Ohio.
Although these factories are not currently operating at full capacity (a major reason why Intel’s profit was so far below expectations), magazine says that Intel could reach its full capacity if it either finds a way to NVIDIA (NASDAQ: NVDA) in chips for artificial intelligence or outsources unused capacity to other chip manufacturers as a foundry (or contract chip manufacturer).
Is Intel stock a buy?
The problem for Intel and its investors is that no matter which path Intel takes, it will take some time for the strategy to succeed.
In the meantime, investors must come to terms with owning a second-class chipmaker whose operating profit margin is worse than that of all its competitors: AMD (NASDAQ:AMD) at 4.6%, Semiconductor manufacturing in Taiwan (NYSE:TSM) with 42.6% or Nvidia with 64.9%.
Given such figures, Intel stock can hardly be described as a buy.
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Rich Smith does not own any of the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
Why Intel shares continued to fall today was originally published by The Motley Fool.
