How Intel Stock Falls To $10

Core Insights - Intel's stock has seen minimal movement in 2023, with only a 2% increase, as the company faces challenges in its core CPU market and foundry ambitions despite over $50 billion in investments [1][3] - Revenue has significantly declined from $79 billion in 2021 to a projected $53 billion in 2024, with expectations of further stagnation [1][3][7] - Competitors like AMD and Nvidia have seen substantial stock increases of 43% and 24% respectively, highlighting Intel's struggles [1] Revenue Trends - Intel's sales have dropped sharply, with a decline from $79 billion in 2021 to $53 billion in 2024, attributed to reduced CPU sales and market share losses to AMD [3][4] - The PC market is stabilizing, but Intel's revenue is expected to decline by 2% this year, indicating potential stagnation in the near term [3][7] - The foundry business is not performing as expected, with Intel's advanced manufacturing technology primarily being used for internal products rather than attracting external customers [3][4] Market Competition - Intel's CPU market share is under pressure from competitors like ARM and Qualcomm, which are entering the PC space with AI-capable chips [4] - The rise of generative AI applications is shifting server design towards GPU-centric architectures, further challenging Intel's traditional CPU business [4] Foundry Operations - Intel faces a dilemma in balancing competitiveness with the financial health of its foundries, as it has outsourced some chip orders to TSMC, impacting its internal manufacturing [5][6] - The foundry business reported an operating loss of $7 billion on sales of $18.9 billion in 2023, indicating significant challenges in this segment [9] Margin Analysis - Intel's adjusted net margins have fallen from over 28% in 2021 to about 8.5% in 2023, with projections of margins remaining depressed at around 5% in 2025 [8][9] - The decline in margins is attributed to sales drops and losses in the foundry business, raising concerns about future profitability [8] Stock Valuation - Currently trading at approximately $20 per share, Intel's stock is valued at about 160 times estimated 2025 earnings, reflecting investor optimism despite recent underperformance [10] - If Intel's revenue stagnation continues and margins remain low, the stock price could potentially drop to around $10 per share based on a reassessment of its recovery path [11][12]