The stark divergence between Intel (INTC) and Nvidia (NVDA) displays a tale of two contrasting trajectories. While NVDA under the helm of Jensen Huang boasts as the S&P 500 Index’s best-performing stock, with year-to-date gains exceeding 114%, Intel finds itself languishing at the bottom, shedding over 60% of its market cap. Intel’s struggles transcend mere quarterly setbacks; they embody a protracted decline marked by a recent earnings release that jolted investors, leading to the stock’s most substantial one-day decline in fifty years.
Currently trading just under $20 a share, Intel’s market cap hovers around $84 billion. This piece delves into the reasons behind Intel’s stock plunge against the backdrop of unbridled growth among other chip manufacturers.
The Intel Enigma Unraveled
Stock prices typically plummet due to an increased share count, sustained underperformance, or splits, often encompassing a combination of these factors. Observed through the lens of Intel, the last stock split dates back to 2000, effectively eliminating split-induced declines as a reason for the subdued stock performance. In contrast, Nvidia recently executed a 10-for-1 stock split during its meteoric rise.
During the dot-com heyday, Intel undertook four 2-for-1 stock splits between 1995 and 2000, riding high on the euphoria gripping the period. However, the dot-com bubble eventually burst, leaving Intel among the wreckage of companies unable to recapture its former glory days.
Intel’s Landscape amid Chip Industry Titans
Market cap nuances offer deeper insights into stock depression than absolute price levels. Intel’s market cap hovering at $85 billion starkly contrasts with Nvidia’s colossal $2.6 trillion valuation. Nvidia briefly eclipsed Apple and Microsoft to clinch the world’s top spot in terms of market cap, bolstering its industry supremacy.
Amdist other chip giants, Advanced Micro Devices (AMD) commands a $215 billion market cap, while Taiwan Semiconductor Manufacturing Company (TSM) flaunts a hefty $700 billion valuation – a realm where Intel seeks to compete through its foundry endeavors.
Nvidia’s Rise against Intel’s Revenue Backdrop
Despite Nvidia’s stratospheric market cap outgunning Intel, it only recently surpassed Intel’s revenue figures. Trailing twelve months showcase Intel securing $55.12 billion in revenues against NVDA’s $77.7 billion, TSM’s $74.97 billion, and AMD’s $23.27 billion.
Lamentably, Intel’s revenue trajectory mirrored a freefall while industry peers surged, with the company’s 2023 revenues languishing almost 25% below 2019 figures. Profitability paints an equally grim picture, with Intel’s GAAP net income plummeting 79% last year, attributed in part to the foundry business hemorrhaging a colossal $7 billion in operating losses.
Valuation Woes Trail Intel
Intel’s valuation metrics lag behind chip industry counterparts, exemplified by a modest next 12-month price-to-sales multiple of 1.57x – a stark contrast to AMD’s 7.4x and NVDA’s 19.6x multiples. Investor sentiment, rife with pessimism, underscores the gloom shrouding the company.
Despite looming Intel’s NTM price-to-earnings at 52.6x over Nvidia and AMD, tepid earnings forecasts have fueled subdued expectations. Projections see Intel amassing earnings per share of -$0.39 amidst its ongoing travails, imparting an unwelcome uptick to INTC’s PE multiple.
In essence, Intel’s somber revenue growth, lackluster profitability, and trailing valuations conspire to anchor the company’s stock at its present low.
Parsing the Intel Debacle
Intel’s ascent to the apex of the chip sphere in 1992 was marred by a gradual erosion of its dominance amid the industry’s eastward drift towards Asia. Missed opportunities, notably in the smartphone era and the advent of AI, underscore Intel’s downward spiral vis-a-vis industry vanguards like AMD and Nvidia encroaching on its traditional PC market share.
Analysts draw parallels between Intel and erstwhile market titans like Nokia, Kodak, and BlackBerry, teetering on the brink of irrelevance. While Intel’s plunge isn’t definitive, CEO Pat Gelsinger faces a Herculean task steering the iconic American enterprise back towards glory.