Intel: If You Build, They Will Come

Investment Conclusion - Intel Corporation (NASDAQ: INTC) reported disappointing revenues and earnings for 2Q24, with revenues remaining flat compared to 2Q23 and a loss exceeding $1 billion [2] - Speculation exists regarding potential divestment of its foundry business or downsizing of expansion plans, but the company has a long-term roadmap and is implementing strategies for recovery [2][3] - By the end of 2024, Intel plans to shrink its chip manufacturing process to 1.8nm, reclaiming process leadership from TSMC [2] - Upcoming products include the Lunar Lake AI CPU with 45 TOPS of neural net processing and the Panther Lake AI CPU with 50 TOPS, positioning Intel competitively against Qualcomm and AMD [2] - Intel's Xeon 6 series server CPUs will surpass AMD's offerings in core count, with the Clearwater Forest E-core expected to have 288 cores [2] - The Gaudi 3 AI accelerator is set to outperform Nvidia's H-100 GPU in price/performance metrics [2] - A restructuring of leadership has occurred, with Patrick Gelsinger as CEO, and the Semiconductor Co-Investment Program (SCIP) has been instituted to enhance financial flexibility [2][3] Financial Performance - FY23 revenues fell 14% to $54.2 billion, with significant declines across all segments, but recent quarters show signs of recovery [8][7] - 4Q23 saw a 10% revenue increase year-over-year, with improvements in gross and operating margins [8] - Projections indicate that Intel's revenues and earnings growth may rebound in 2025-2026, supported by upcoming product launches and market dynamics [3][7] Market Position and Strategy - Intel's foundry business is being restructured to treat external and internal customers equally, aiming to regain market share lost to TSMC and Samsung [5][6] - The company is focusing on AI integration across its technology stack, with expectations of significant growth in AI PC sales and data center AI processors [5][8] - Intel's strategy includes a disaggregated approach to chip offerings, allowing customers to mix and match components, contrasting with Nvidia's monolithic model [6] - The semiconductor industry is projected to grow significantly, with Intel targeting $15 billion in foundry revenues by 2030 [9][8] Long-Term Outlook - Intel aims for $100 billion in revenues by 2030, with a focus on improving gross and operating margins [9] - The company anticipates strong growth in AI PCs, data center AI processors, and networking semiconductors, driven by increasing demand for AI capabilities [8][9] - Management's restructuring efforts and cost-cutting measures are expected to enhance operational efficiency and profitability [9][7]