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Triple Threats to Intel's Share Value
Triple Threats to Intel's Share Value

Three Potent Threats to Intel's Share Value

Intel's 2024 wasn't exactly a triumph for its shares, with numerous missteps and the unexpected retirement of CEO Pat Gelsinger late last year. Now led by interim co-CEOs without a clear strategy, investors are rightfully wary of a turnaround.

Though management might begin to steer the ship back on course this year, significant challenges loom. These challenges primarily revolve around Intel 18A, the final stop in its five-nodes-in-four-years manufacturing plan. If Intel 18A soars, the comeback is within reach. However, any misstep could setback the recovery significantly.

Intel 18A is a game-changer in terms of manufacturing technology. It introduces a new type of transistor and makes use of backside power delivery, a feature that enhances performance and efficiency. This innovation is vital, as multiple major buyers have already expressed interest. To secure larger investments, Intel needs more customer wins along the line, which may prove challenging with interim leadership.

Beyond foundry business, upcoming product lines for server CPUs and PCs are scheduled to utilize Intel 18A. So, any delay or issues with the process would not only hamper the foundry business but also jeopardize these critical product lines. Moreover, if Intel 18A falters, the chances of a successful turnaround grow slim.

In the PC market, Intel faces two challenges. The ill-fated Raptor Lake suffered from glaring stability issues that resulted in extended warranties. Meanwhile, the latest Arrow Lake performs poorly in gaming workloads compared to both Raptor Lake and AMD's offerings. Despite software fixes, Arrow Lake continues to underperform in gaming, causing negative buzz that affects the entire client computing segment.

Lastly, Intel's AI accelerator business is lagging behind its potential due to premature software and immature software hindering adoption. Intel aimed for $500 million in AI accelerator sales in 2024, but fell short. The company intends to merge Gaudi with data center GPUs, a strategy that may bear better results in 2025. Unfortunately, AMD is thriving in the AI sector, leaving Intel with few excuses.

In summary, Intel's reliance on the 18A process and its performance is the deciding factor in its turnaround. With pending product lines hinging on its success, failure could be an extended stay in the doldrums. Conversely, if it delivers on its promise, Intel could soon reclaim its place atop the semiconductor industry.

Investors are closely tracking Intel's strategy with the interim leadership, as any missteps in the 18A manufacturing process could significantly setback the company's comeback and impact its finances, potentially leading to further losses in investing.

To secure larger investments and boost its finance, Intel needs to demonstrate success with its Intel 18A product lines, especially in the foundry business and critical server CPU and PC product lines, as any delays or issues could jeopardize these projects and hinder the company's turnaround.

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