1. Intel Corp. (NASDAQ:INTC)
Year to Date Return: -50%
Number of Hedge Fund Holders: 75
Intel Corp. (NASDAQ:INTC) is one of the largest semiconductor companies that designs, develops and sells computing and other related products. While semiconductors have seen their market value skyrocket amid artificial intelligence, that has not been the case for Intel.
The company has lost more than half its market value over the past five years and is down by about 50% for the year, affirming why it is one of the worst-performing blue chip stocks in 2024. The underperformance comes from the company struggling with production delays, chip shortages, and abrupt strategic changes under several CEOs.
Intel Corp. (NASDAQ:INTC) produced the tiniest, densest, and most potent x86 CPUs worldwide for many years. However, each generational upgrade made smaller chips more difficult and costly. Consequently, a large number of chipmakers, including AMD, outsourced the entire manufacturing process and spun off their capital-intensive foundries.
Intel Corp. (NASDAQ:INTC) fell behind TSMC and Samsung’s foundries in the “process race” to produce smaller and denser chips, but it also declined to follow AMD’s lead and become a fabless chipmaker. It attempted to catch up, but those disorganized attempts slowed down the development and manufacturing of its chips.
Many of its customers switched to AMD in order to secure a consistent supply of higher-end chips made by TSMC after becoming dissatisfied with its ongoing delays and shortages.
Amid the struggles, the company’s long-term prospects are slowly improving, having inked a $3 billion deal as part of the CHIPS act with the U.S. Pentagon. Likewise, the company’s P.C. chip, Intel 7, derived from the company’s 10-nanometer (nm) process, is increasingly eliciting strong demand, allowing the company to regain market share in the P.C. market.
Here is what ClearBridge Large Cap Value Strategy said about Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter:
“While the market environment clearly was a headwind in the third quarter, several of our large positions also faced challenging conditions, which negatively impacted results. In the information technology (IT) sector, Intel Corporation (NASDAQ:INTC) has come under additional pressure due to continued softness in the company’s core PC and server markets as well as concerns on the company’s longer-term competitive position. While Intel’s turnaround is not happening overnight, we are constructive on the outlook into 2025: the company’s product positioning should be much improved and it should be positioned to gain market share in a cyclical upswing in which it has strong earnings power. A somewhat adverse spending environment due to AI myopia has weighed on shares, but we still think the market is undershipping PCs and general servers following a COVID normalization period that saw demand get pulled ahead and then languish as companies froze IT budgets. The installed base is now getting older, and we expect a strong refresh cycle into next year. The delay is actually beneficial to Intel, whose product positioning will be all the more improved. While our investment case is not predicated on an M&A transaction, and we believe one is unlikely, the expression of interest in the company speaks to the value of the assets, which we think still trade at a meaningful discount to fair value.”
While we acknowledge the potential of INTC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than INTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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