TLDR:
- Intel’s new CEO Lip-Bu Tan will host his first earnings call this Thursday
- Intel stock has fallen 45% over the past year with shares now around $19
- The company faces challenges in AI chip development, lagging behind Nvidia and AMD
- Intel recently sold a 51% stake in its Altera unit to Silver Lake
- Potential joint venture with TSMC was mentioned in reports but denied by TSMC’s CEO
Intel’s new CEO Lip-Bu Tan will face his first quarterly earnings test this Thursday, with investors eager to hear his plans for the struggling chipmaker. Tan, who was appointed in mid-March, takes over a company that has seen its stock price drop 45% over the past year.
The former Cadence Design Systems CEO hasn’t been completely silent since taking the helm. He delivered a keynote address at a company event in March, acknowledging that “there are areas we have fallen short of your expectations.”
Investors initially responded positively to Tan’s appointment, bidding the stock up. However, those gains have since evaporated, with shares now trading near $19.
The company’s struggles led to the December retirement of former chief Pat Gelsinger. Intel has been largely left out of the artificial intelligence infrastructure boom that has benefited competitors.
Restructuring Efforts Underway
One of Tan’s first major moves has been selling a 51% stake in Intel’s Altera programmable chips unit to tech-focused private equity firm Silver Lake. This divestiture signals Tan’s willingness to restructure the company’s portfolio.
Reports have also described a possible chipmaking joint venture with Taiwan Semiconductor Manufacturing Co. (TSM). However, TSMC’s CEO C.C. Wei recently denied these rumors.
“TSMC is not engaged in any discussion with other companies regarding any joint venture, technology licensing or technology transfer and sharing,” Wei stated during a conference call.
Wall Street analysts expect Intel to report revenue of $12.3 billion and adjusted net income of $41.6 million for the most recently completed quarter. All analysts tracking the company currently maintain neutral ratings.
Their average price target sits just under $23, representing a potential 20% upside from current levels. However, most are waiting for Thursday’s earnings call before adjusting their outlook.
AI Challenges Loom Large
Intel’s turnaround faces steep challenges in the AI chip market. The company’s market share in graphics processing units (GPUs) is virtually zero, trailing far behind industry leader Nvidia and competitor Advanced Micro Devices.
The company has tried multiple times to create competitive GPUs without success. Earlier this year, Intel scrapped plans to bring its Falcon Shores GPU to market, deciding to use it only as an internal test chip.
Current efforts are focused on the Jaguar Shores GPU, designed specifically for AI inference and high-performance computing. This chip will reportedly be part of a broader rack-scale system rather than a standalone product.
Making headway against Nvidia presents a formidable challenge. Nvidia has built a strong competitive moat through its CUDA software platform, which enables its chips to be programmed for tasks beyond their original purpose of graphics rendering.
Tan’s turnaround strategy appears to focus on three key areas: revitalizing Intel’s efforts in AI chips, improving its foundry business, and streamlining operations. The first two goals face substantial hurdles.
Despite these challenges, some analysts believe there is still value to be unlocked in Intel stock. The market’s current valuation reflects considerable pessimism about the company’s prospects.
Thursday’s earnings call will provide crucial insights into Tan’s vision and specific plans for addressing Intel’s competitive position. Investors will be listening closely for details on cost-cutting measures, strategic partnerships, and product roadmaps.
For the immediate term, Wall Street seems content to take a wait-and-see approach. The consensus view suggests cautious optimism that Tan can begin to right the ship, but acknowledges the difficult road ahead.
Intel’s turnaround will likely take time and face setbacks along the way. The quarterly results this Thursday will be less important than the strategic direction Tan outlines for the company’s future.
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