Uncertainty Around German Fabs

Intel's future in Europe is cloudy. Investors are nervous about the potential cancellation of two semiconductor fabs in Germany. No official word from Intel yet, but the silence is concerning. These fabs were a significant part of Intel's growth plan, expected to be operational by 2027 at a cost of $33 billion, with a third funded by the EU. Meanwhile, TSMC is moving forward with its own fab in Germany, further adding to Intel’s woes.

Stock Near 10-Year Low

Intel's stock has taken a beating, trading just above its 10-year low. This raises the question: Is Intel a hidden gem in the AI space or just a company struggling to keep up? The AI angle is intriguing, but it comes with a lot of uncertainty.

Government Support Could Be Key

Intel's push to improve its manufacturing capabilities is aligned with economic and national security interests for the U.S. and the EU. There's a possibility of more government funding to build new fabs, but this comes at a challenging time for Intel. The company is in the middle of a cost-cutting spree—15% of the global workforce is being laid off, the dividend is suspended, and assets are being sold.

Challenges in High-Performance Processors

Intel's efforts to become a leader in high-performance processors for data centers aren't paying off yet. The recent AI PC launch has put pressure on margins, rather than boosting profits. The AI promise isn’t materializing in the PC and server markets, and the fabrication unit is burning cash.

Risk vs. Reward

With the stock down 60% year to date and 71% from its 10-year high, Intel might be an opportunity for those with a high tolerance for risk. The company still has strong business relationships and could benefit from government support to build a strong contract fab business. However, if I’m looking for clear signs of a turnaround or evidence that Intel will dominate in AI, those signs haven’t appeared yet.

Conclusion

Intel is a high-risk, high-reward play right now. The potential upside could be explosive if things turn around, but the uncertainties are significant. Patience and a strong stomach may be required to see how this unfolds.

Strategy

Using the Momentum Crossover Strategy, I’ve identified a new entry point—marking the fifth buy signal in the past four years.

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This is market commentary, not personalized financial, real estate, tax, legal, or otherwise advice. It is not and shall never be deemed reasonably sufficient information for the purposes of evaluating a security. I may hold beneficial positions for or against the securities discussed. This content is solely to provide generalized perspective, facts, and commentary.