According to a Wall Street Journal which appeared in print this morning, Intel (NASDAQ: INTC) stock is too big to fail. Based on current trading, investors aren’t so sure.
Shares of the former semiconductor king fell 2% through 1:45 p.m. ET on Monday, continuing a nearly uninterrupted slide in stock price since a disastrous second-quarter earnings report that sent the stock down 37% in just over a week and a half.
What the WSJ Says About Intel
The column shows the Magazine argued that while Intel will need a lot of time and money to get back on track, recovery is inevitable for several reasons. First, the company has factories that are actually worth more than the stock they are currently selling for, and these are “the key to Intel’s staying power.”
The importance of semiconductors to modern life and the modern economy, says the Magazinemeans that the US government cannot let Intel fail as a company. The publication points to the Chip Act of 2022 passed by Congress, and the $8.5 billion in subsidies the government has awarded to Intel to help the company build new chip factories in Arizona and Ohio.
While these factories are not currently running at full capacity (a major reason why Intel’s profits have lagged so far), Magazine says Intel could add capacity if it can find a way to compete with Nvidia (NASDAQ: NVDA) in artificial intelligence chips, or outsource unused capacity to other chipmakers as a foundry (or contract chipmaker).
Is it wise to buy Intel stock?
The problem for Intel and its investors is that it takes time for the strategy to succeed, no matter which direction Intel takes.
In the meantime, investors must resign themselves to owning a second-tier chipmaker with an operating profit margin that is worse than the companies it competes with: AMD (NASDAQ: AMD) with 4.6%, Taiwanese semiconductor production (NYSE:TSM) with 42.6%, or Nvidia with 64.9%.
With numbers like these, it’s hard to buy Intel stock.
Should You Invest $1,000 in Intel Now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long Jan 2025 $45 calls on Intel and short Aug 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
Why Intel Stock Kept Falling Today was originally published by The Motley Fool
