1. Intel Corp. (NASDAQ:INTC)
Year to Date Gain: -52.30%
Number of Hedge Fund Holders: 75
Intel Corporation (NASDAQ:INTC) is the worst-performing NASDAQ stock in 2024, having shed about 52.30% in market value year to date. Intel’s struggling foundry business is primarily to blame for its problems, exacerbated by a slowdown in PC sales that has affected its sales for PC chips.
Consequently, Intel Corporation (NASDAQ:INTC) has accumulated losses for the better part of the year as it faces stiff competition in chip manufacturing from Taiwan semiconductors. In the second quarter, it posted a $2.8 billion operating loss, bringing its loss for the first half of the year to $5.3 billion.
In addition to the difficulties of quickly implementing new production techniques, Intel has had to deal with a severe decline in the PC market and data center clients who preferred AI chips to general-purpose CPUs. In order to stabilize its finances, the company has been forced to take drastic measures, announcing a $10 billion cost-cutting program that includes 15% employee layoffs.
As it stands, Intel Corporation (NASDAQ:INTC) is in a transition phase as it tries to revitalize its growth prospects. It is making significant investments in manufacturing in an effort to transform a small foundry into a competitor of market leader TSMC.
For Intel, the 18A process is essential to its future chip designs as it promises enhanced performance and power efficiency. The process will be the primary attraction for the foundry business, and the company intends to use it to create many of its own products.
Amazon and Microsoft are high-profile clients that Intel has already attracted with the 18A process. Nevertheless, it will take time to generate significant external revenue from Intel 18A, which will start scaling up production next year.
According to the Insider Monkey database, 75 hedge fund portfolios included Intel Corporation (NASDAQ: INTC) at the end of the second quarter of this year. This is a slight decrease from the previous quarter, where 77 hedge fund portfolios held Intel Corporation.
Here is what ClearBridge Large Cap Value 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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