Intel shares are currently on a growth trajectory.
Securities of the mentioned company, based in Santa Clara, California, rose by more than 3% on Friday, August 30. The corresponding dynamic is largely due to what can be called investor enthusiasm. These sentiments are a kind of reaction to reports spreading in the information space that Intel, which is in difficult straits and at the same time seeking to strengthen and expand its position in the chip manufacturing industry, is currently considering options to improve the present situation and provide incentives for the development of its business. Investors reacted positively to this news, which put the company’s securities on a growth trajectory after one of the worst declines in recent decades.
Last Thursday, August 29, the media reported that Intel is currently interacting with investment bankers to discuss possible options for restructuring and transforming its business space. According to journalists, the company considers separating its flagship product business from the unprofitable manufacturing unit as one of the viable strategies. At the same time, such an option is one of the possible variations and does not belong to the category of what is guaranteed to be implemented.
The media also reported that Intel admits the possibility of scrapping some production projects. The company is currently discussing an appropriate strategy. Intel has not yet made a final decision on further moves concerning production projects.
It is worth noting that in the context of the current situation, the company faced a very difficult choice. Intel is aware of the need to take painful measures to a certain extent to improve the financial component of its condition. At the same time, the company aims to become a major player in the chip manufacturing area. However, the realization of this aspiration requires significant financial injections. The construction of new and expansion of existing production facilities for the manufacturing chips is Intel’s technological and conceptual transformation platform in the context of striving to become a contract maker of microcircuits for other firms specializing in the development of appropriate products. From the point of view of this goal, the likely scrapping of some production projects is a factor of sensitive negative impact. The most optimistic scenario within the framework of such potential Intel moves will mean a slowdown in the implementation of intentions to strengthen and scale positions in the chip-making area. At the same time, it is worth noting that it was the massive expenditures associated with achieving the specified goal that significantly worsened the financial situation of the company.
There is a possibility that Intel’s market capitalization will increase by $3 billion this week. It is worth noting that at the beginning of the current month, the corresponding figure fell below the $100 billion mark for the first time in three decades.
There is a kind of consensus among investors that separating Intel’s business is the most constructive and appropriate strategy in the context of the current state of affairs. Against the backdrop of the gaining momentum era of artificial intelligence, the company is gradually losing its position in the technology sector, lagging behind players such as Nvidia, which market capitalization this summer due to the so-called AI boom crossed the $3 trillion mark, and Advanced Micro Devices (AMD). It is worth noting that the rapid development and spread of machine intelligence stimulates a high level of demand for chips. In the context of the technological realities of the artificial intelligence era, microcircuits are what can be called strategic products of vital necessity. Without chips, it is impossible to train machine intelligence systems and ensure the subsequent operation of these digital services.
Last month, Intel announced new artificial intelligence microcircuits designed for use in data centers. During a speech at the Computex technical conference in Taiwan, company chief executive officer Pat Gelsinger stated that the new Xeon 6 processor will provide a higher level of performance and power efficiency when operating with high-intensify workloads in data centers compared to the previous generation of the corresponding products of the firm. Also this year, Intel announced the Gaudi 3 processor. The mentioned product of the company is designed for training and subsequent deployment of artificial intelligence models. Intel separately noted that the price of Gaudi 3 will be lower compared to similar indicators of analogous processors of competitors.
Moreover, the company will launch Lunar Lake processor sales in the current year. This product is intended for use in personal computers equipped with artificial intelligence technologies. Lunar Lake sales are expected to launch in September.
It is also worth noting that Intel has received $20 billion from the United States government to implement plans related to the production of chips. The corresponding funding will be spent on plants and research centers in Oregon, Arizona, New Mexico, and Ohio. In total, Intel plans to spend $100 billion for these purposes. At the same time, financial difficulties that forced the company to consider the possibility of separating the business may cancel part of the specified plans.
Intel’s stock value has fallen by about 60% this year. At the same time, AMD securities dropped in price by less than 2% in 2024. The value of Nvidia shares has more than doubled this year.
It is worth noting that Intel shares were on a significant decline trajectory amid disappointing earnings data from the company in the second quarter of the current year. The firm’s revenue for April-June 2024 was fixed at $12.83 billion. This indicator decreased by 1% compared to the result for the same period in 2023. Moreover, the LSEG consensus forecast provided that Intel’s revenue for the second quarter of the current year would be fixed at $12.94 billion. After the company’s earnings data for April-June 2024 were published, the value of its shares fell by 20%. It is worth noting that the reasons for this negative dynamic also were factors such as the pausing of dividend payments and the intention to cut the number of workforce, concerning 15% of Intel employees. In this case, the layoffs are carried out as part of the company’s plan to reduce costs by $ 10 billion.
On Thursday, during a speech at Deutsche Bank’s Technology Conference, Pat Gelsinger said that Intel is aware of skepticism from investors. Also in this context, he noted that the company is making efforts to address the mentioned sentiments. Besides, Pat Gelsinger stated that Intel is aware of the need to operate efficiently with nimbleness, and with urgency.
The media reports that the company is currently cooperating with Morgan Stanley advisors as part of work on likely business strategies. The mentioned bank did not respond to a request from journalists regarding the provision of consulting services for Intel.
It is worth noting that the company’s statements about projects and intentions related to the expansion of the production of artificial intelligence chips were not perceived by investors as arguments in favor of an optimistic vision of the firm’s prospects. At the same time, the dissemination of information about a potentially possible business separation has become a positive impulse in the context of the mentioned sentiments. This means that investors do not believe that the firm, in its current condition, is capable of achieving significant results, including within the framework of the commercial component of its activities.
