What's Wrong With Intel Stock?

Company Performance - Intel has experienced a significant decline in market share and financial performance over the past two decades, with its stock posting a negative total return since Jan 1, 2000 [1] - Revenue has dropped to $55 billion over the last 12 months, down from close to $80 billion a few years ago, despite the booming semiconductor market due to AI [4] - Free cash flow has been negative for close to two years, with a negative $12 billion over the trailing 12-month period, marking a stark contrast to the 25 years prior when Intel consistently generated positive free cash flow [4] Market Share and Competition - Intel has lost significant market share to design-only firms like Nvidia and Advanced Micro Devices, as well as to Taiwan Semiconductor Manufacturing (TSMC) [1][2] - TSMC's foundry model, focusing solely on manufacturing, has allowed it to move quickly and reinvest earnings from hundreds of design customers, leading to advancements in semiconductor technology [2] - Intel's reluctance to abandon its vertically integrated model of both designing and manufacturing chips has caused it to fall behind TSMC, especially after TSMC embraced extreme ultraviolet lithography (EUV) systems from ASML [2] - Even Apple, a major player in Silicon Valley, has become a significant customer for TSMC, further eroding Intel's market position [3] Strategic Shifts and Challenges - Intel has recently begun to embrace the foundry model, planning to manufacture chips for third-party design customers and investing tens of billions of dollars in new manufacturing facilities, primarily in the United States and Europe [5] - The US government is planning to provide $19.5 billion in grants under the CHIPS Act to support Intel's efforts, although the funding has not yet been received [5] - Despite these efforts, Intel's foundry business is currently underperforming, with last quarter's sales at $4.3 billion and an operating loss of $2.8 billion, indicating a need for significant revenue growth to achieve profitability [5] Investor Sentiment and Future Outlook - Investors are increasingly pessimistic about Intel's ability to compete in both design and foundry segments, with the foundry business lagging far behind TSMC [6] - Intel's stock is down 72.5% from its 10-year high, reflecting the company's struggles and the lack of momentum in its foundry segment [6] - The company's future remains uncertain, with no guaranteed winner in modern semiconductor manufacturing, and Intel's ability to recover from its current challenges is unclear [6]