In this article, we’re going to talk about the 10 worst performing NASDAQ stocks in 2024.
Factors Driving Market Growth
Markets have been soaring for the better part of the year, with pullbacks acting as entry levels from where investors have joined and pushed the market higher. While artificial intelligence was one of the factors that drove many tech stocks higher, earnings results that were better than expected also had a significant impact.
Similarly, a resilient US economy that has stayed clear of recession amid high interest rates and inflation has also supported the upward momentum. With the NASDAQ and other major indices at all-time highs, investors are becoming increasingly concerned whether the strong upward momentum is sustainable.
READ ALSO: 10 Most Promising Future Stocks According to Analysts and 10 Most Promising Growth Stocks According to Hedge Funds.
Challenges and Investor Concerns
Valuations appearing overstretched after one of the longest bull runs are one factor that is sending jitters among the investment community. Similarly, concerns over the negative impact of high interest rates and uncertainty over the US election are slowly curtailing the upward momentum.
Bryn Talkington, managing partner of Requisite Capital Management, believes markets will remain choppy heading into year-end owing to the uncertainty around the US election.
“Until the election is over and we can confirm gridlock, I think at the headline number we’re not going to do much, but I think underneath the surface we’re going to see the haves and have nots,” she said.
Nevertheless, it is the impact of the soaring geopolitical tensions in the Middle East that threatens to affect supply lines that are keeping the markets on edge. The prospects of energy prices surging and fueling inflation on Israel attacking Iran is also taking a significant toll on investor’s sentiments on equities.
While interest rate cuts were expected to be the catalyst to push the equity markets to record highs, that was not the case, as everything seemed to have already been priced. Paul Christopher, head of investment strategy at Wells Fargo Investment, believes the US Federal Reserve is unlikely to cut aggressively as the better-than-expected jobs report in September and renewed worries of a spike in inflation act as a deterrent.
“Just really not ready to cut quite as aggressively as the markets had previously priced. I think if you take November from a half a point down to a quarter point hike, that’s not really a big deal, but it does require some adjustment in markets. There may be some adjustments to rate expectations for December and January as well,” he told CNBC’s “Squawk Box Asia” earlier this month.
While the US economy does not show enough deterioration to justify aggressive cuts, there are stocks listed on the NASDAQ that have underperformed, attributed to a number of factors. Top on the list are companies whose core businesses are negatively impacted by high interest rates that tend to affect consumer purchasing power.
Likewise, some of the worst-performing stocks in the NASDAQ have also taken a hit on high inflation. While inflation has started showing signs of edging lower even as the Fed continues to cut rates, some of the worst-performing stocks are showing signs of bottoming out as macroeconomics improves.
The October BofA Global Fund Manager survey indicates that investors are more optimistic than they have been in four years. 74% of investors think the United States will avoid a recession, demonstrating their optimism about the economy.
Likewise, Michael Hartnett, an investment strategist at BofA, said that investor sentiment is rising due to expectations of further rate cuts by the U.S. Federal Reserve and hopes that Beijing will release more stimulus to strengthen its economy.
Source: Pexels
Our Methodology
We utilized a stock screener to find NASDAQ-listed stocks with market caps exceeding $2 billion as of October 16. We then sorted the stocks in descending order based on their year-to-date share price performance. From this dataset, we identified the NASDAQ stocks with the largest YTD share price declines as of October 16. The following stocks are listed in descending order of their share price performance.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Worst Performing NASDAQ Stocks in 2024
10. Ulta Beauty, Inc. (NASDAQ:ULTA)
Year to Date Gain: -22.56%
Number of Hedge Fund Holders: 46
Ulta Beauty, Inc. (NASDAQ:ULTA) is a consumer cyclical investment play that operates as a specialty beauty retailer. The company offers branded and private-label beauty products. Given that the company depends on consumers’ purchasing power to sell its products, it’s been badly hurt by high inflation and high interest rates that have significantly affected consumers’ purchasing ability.
Likewise, the stock is down by about 22.56%, affirming why it is among the worst-performing NASDAQ Stocks in 2024. According to analysts, the US beauty industry is still resilient, with yearly growth rates ranging from 2% to 5%.
However, Ulta Beauty, Inc. (NASDAQ:ULTA) is up against stiff competition, especially from Sephora’s growth through its collaboration with Kohl’s (NYSE:KSS). Concerns have been raised regarding Ulta’s capacity to hold onto its market share due to this competitive pressure and the normalization of post-pandemic beauty demand.
The stock remains under pressure amid concerns that Ulta’s competitive edge may be weakened by market fragmentation brought on by the expansion of beauty product distribution channels. Ulta may find it difficult to hold onto its current market position without turning to more aggressive promotional strategies, which could pressure margins, as consumers have more options for where to buy their beauty products.
Nevertheless, Ulta Beauty, Inc. (NASDAQ:ULTA) is still working on growth strategies in spite of the challenging environment. To provide on-demand delivery from more than 1,350 locations, the company has extended its partnership with DoorDash, which could improve its distribution capabilities and clientele. The company is also committed to launching new brands.
Ulta’s loyalty program has about 44 million members, making it a valuable asset in strengthening its recurring revenue base. Credit card revenue, which has grown to be a significant source of profit for the business, has been primarily driven by this robust loyalty network.
Here is what Diamond Hill Long-Short Fund said about Ulta Beauty, Inc. (NASDAQ:ULTA) in its Q2 2024 investor letter:
“Still-rising valuations have made identifying attractively valued, long ideas increasingly challenging — though we still found a few in Q2 that we believe the market is overlooking amid its increasingly narrow focus on the mega-cap technology stocks dominating the major indices. We established new long positions in VeriSign, Ulta Beauty, Inc. (NASDAQ:ULTA), Sysco Corporation and Lamb Weston Holdings during the quarter.
Ulta is a leading US specialty beauty retailer. As inflation has remained relatively elevated and consumers have found ways to economize and moderate discretionary spending, we believe Ulta is well-positioned to take share given its compelling portfolio of beauty brands across various price points, including its own private-label brand. We believe the current share price fails to account for an attractive outlook for the company and capitalized on a low valuation to initiate a position in Q2.”
9. MongoDB, Inc. (NASDAQ:MDB)
Year to Date Gain: -25.17%
Number of Hedge Fund Holders: 54
MongoDB, Inc. (NASDAQ:MDB) is a technology company that provides a general-purpose database platform. While the stock is down by about 25.17%, it is turning out to be one of the worst-performing NASDAQ stocks in 2024, given that the overall market has been on an uptrend.
A slowdown in revenue growth and management reducing guidance has been a key factor that has triggered a deep stock sell-off. MongoDB, Inc. (NASDAQ:MDB) depends on customers signing up to generate revenues using its general-purpose data platform. Because the company charges based on how much a client uses its platform, this is a significant source of revenue.
The addition of new clients slowed in the first quarter. Consequently, management was forced to lower revenue guidance for fiscal 2025 from at least $1.9 billion to $1.88 billion. The reduction rattled investors as it raised concerns about MongoDB’s growth metrics, resulting in the stock sell-off. This is made worse by MongoDB’s lack of profitability. As they invest their profits in pursuing rapid business growth, tech companies frequently run at a loss for years.
MongoDB, Inc. (NASDAQ:MDB) anticipates a drop in revenue from non-Atlas products in fiscal 2025. Consequently, it has had to redesign its sales incentives to place less emphasis on upfront contracts. As a result of this change, revenue from unused commitments will decrease from $40 million in fiscal 2024 to almost nothing this year.
MongoDB is already looking into the future as it looks to reinvigorate its growth prospects and strengthen its revenue base. Consequently, it is leveraging artificial intelligence to introduce the AI Applications Program, which provides end-to-end AI technology to improve its competitive edge in the market. It has also made significant product advancements.
As of Q2 2024, 54 hedge funds held positions in MongoDB, Inc. (NASDAQ:MDB), with a total stake of $879.62 million.
Fidelity Growth Strategies Fund stated the following regarding MongoDB, Inc. (NASDAQ:MDB) in its Q2 2024 investor letter:
“An underweight in software & services firm MongoDB, Inc. (NASDAQ:MDB) (-30%) was the next-largest contributor to the fund’s result versus the benchmark. The company’s shares fell sharply in May, after it reported disappointing Q1 results and reduced full-year guidance for its cloud storage platform, MongoDB Atlas.”
8. Li Auto (NASDAQ:LI)
Year to Date Gain: -26.09%
Number of Hedge Fund Holders: 17
Li Auto Inc. (NASDAQ:LI) is one of China’s biggest automakers, designing, developing, manufacturing, and selling premium smart electric vehicles. It has sought to differentiate itself from the competition in selling extended-range electric vehicles (EVs).
Nevertheless, the Chinese EV giant has had a rough run in the market, going down by 26.09% and cementing its position as one of the worst-performing NASDAQ stocks in 2024. The company’s sentiments took a hit early in the year, disappointing investors with guidance that raised concerns about its core business.
Li Auto Inc. (NASDAQ:LI), saying it was poised to ship between 100,000 and 103,000 electric vehicles in the first quarter, could have gone better with the market. That’s because the guidance was way lower than the 131,805 cars that the company shipped in the fourth quarter. The company delivered 80,400 vehicles in the first quarter, missing its guidance by a big mark, affirming slowing growth.
Additionally, the stock’s sentiments took a hit after the company’s fully electric car, Li Mega, failed to boost sales in the second quarter as expected. The car only boosted vehicle revenues by 8.4%, raising serious questions about demand in the market as the company battles stiff competition from the likes of Tesla.
Nevertheless, Li Auto Inc. (NASDAQ:LI) delivered better-than-expected second-quarter results, earning $0.10 a share as sales reached $4.4 billion. However, declining vehicle margins are once again raising serious concerns about Li Auto cutting vehicle prices as it tries to fuel sales. Operating margin came in at 1.5%, up from a negative margin of 2.3% in the first quarter but lower than the 5.7% in the same quarter of 2023.
The number of hedge funds holding Li Auto Inc. (NASDAQ:LI) dropped from 29 to 17, reflecting a decline in interest among hedge funds.
7. GLOBALFOUNDRIES Inc. (NASDAQ:GFS)
Year to Date Gain: -29.96%
Number of Hedge Fund Holders: 21
GLOBALFOUNDRIES Inc. (NASDAQ:GFS) is a semiconductor company that provides mainstream wafer fabrication services and technologies. It manufactures various semiconductor devices, including microprocessors and mobile application processors.
The company’s woes in the market stem from failing to capitalize on the artificial intelligence boom. Consequently, the stock is down by about 29.96%, emerging as one of the worst-performing NASDAQ stocks in 2024.
In its second-quarter report, GLOBALFOUNDRIES Inc. (NASDAQ:GFS) did not state how it is positioned to benefit from AI, let alone mention the words AI. As other companies led by Taiwan Semiconductor ramp up chip production to meet the growing demand for AI, GLOBALFOUNDRIES Inc. (NASDAQ:GFS) remains focused on serving the smartphone, automotive and Internet of Things sectors. Consequently, the company’s sales growth has been much lower than those of companies exposed to AI.
The company’s latest quarter saw a 12% year-over-year decline in revenue, indicating that it is finding it difficult to take advantage of the boom occurring in other areas of the chip industry. The significant revenue drop might explain why the stock remains under pressure.
There are cyclical trends in the semiconductor industry, and GLOBALFOUNDRIES Inc. (NASDAQ:GFS) experienced a decline in the first half of 2024. Nevertheless, stronger demand from the automotive sector is already helping revenue recover from its lowest points
6. Biogen Inc. (NASDAQ:BIIB)
Year to Date Gain: -28.04%
Number of Hedge Fund Holders: 46
Massachusetts-based Biogen Inc. (NASDAQ:BIIB) discovers, develops and delivers therapies for treating neurological and neurodegenerative illnesses. In the competitive drug development sector, the stock has underperformed, by 28.04%.
The underperformance, which has cemented Biogen’s status as one of the worst performing NASDAQ stocks in 2024, comes on the company suffering a series of setbacks with its Alzheimer’s treatment, Leqembi. Declining sales of key multiple sclerosis (MS) treatments, Tecfidera and Tysabri, have only exacerbated the situation, fuelling the stock sell-off.
In addition, Biogen Inc. (NASDAQ:BIIB) has faced significant headwinds due to decreased contract manufacturing and royalty income. Similarly, the company delivered disappointing second-quarter results, with revenue coming in flat at $2.5 billion as adjusted earnings per share increased 31.3% in the fiscal second quarter of 2024.
The company has embarked on a cost-cutting drive targeting $1 billion in savings by 2025. There are concerns that cutting costs would make it difficult for Biogen Inc. (NASDAQ:BIIB) to strengthen its product pipeline and, therefore, strengthen its revenue base.
Management anticipates a 1% to 5% drop in revenue this year despite the new drug launches. That is not encouraging for a company trying to generate enough growth from its latest products to appease investors in the near future.
Amid a string of disappointing reports, the company has achieved a significant milestone in treating kidney transplant rejections. The U.S. Food and Drug Administration awarded felzartamab, a treatment for late antibody-mediated rejection (AMR) in kidney transplant recipients, Breakthrough Therapy Designation. BTD is given to preclinical medication candidates for life-threatening illnesses that have shown promise in significantly outperforming current therapies.
46 hedge funds held positions in Biogen Inc. (NASDAQ:BIIB) at a stake value of $1.49 billion in Q2 of 2024.
Patient Capital Management’s Patient Capital Opportunity Equity Strategy stated the following regarding Biogen Inc. (NASDAQ:BIIB) in its Q2 2024 investor letter:
“Biogen Inc. (NASDAQ:BIIB) is another name that we believe is underappreciated. As a global biopharmaceutical business, the company is most well known for their products in multiple sclerosis, spinal muscular atrophy, and most recently Alzheimer’s disease. The new CEO, Christopher Viehbacher, is working to improve the company’s pipeline, most recently with their acquisition of Human Immunology Biosciences Inc. in May. Chris has a strong track record of successful M&A and we expect him to continue that tradition. More importantly, we think the market is currently giving the company no credit for success in their Alzheimer’s indication. While the uptake in Leqembi, their Alzheimer’s product, has been slow, we still see strong long-term potential for a patient population that is dramatically underserved. We find the risk/reward extremely attractive.”
5. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Year to Date Gain: -33.45%
Number of Hedge Fund Holders: 48
Warner Bros. Discovery, Inc. (NASDAQ:WBD) is a communication services company that operates as a media and entertainment company. The company creates and distributes content and brands across television, film, and streaming.
The stock has declined 33.45% year to date, underperforming the overall market. The underperformance has been fueled by disappointing second-quarter results whereby the media giant posted a more considerable than-expected loss of $4.07 a share as revenue also fell short of expectations at $9.7 billion amid declines across all business segments.
Warner Bros. Discovery, Inc. (NASDAQ:WBD)’s underperformance has also been fueled by the company’s challenges in linear advertising. In an environment of cord-cutting and other shifts in the media industry, the media giant has found it challenging to secure distribution deals.
The company’s challenges have been exacerbated by the fact that the media industry, the TV and streaming industries, are going through a difficult moment. Due to market saturation, the growth of streaming subscribers has slowed to a crawl, and the cable television industry is still contracting.
At the same time, intermediaries like Warner Bros. Discovery, Inc. (NASDAQ:WBD) are finding it more and more costly to operate in the TV industry. The cable giant must now compete with Amazon for the rights to broadcast a limited number of NBA games.
Nevertheless, the company’s outlook has improved with the signing of a multiyear distribution agreement with Charter Communication. The pact opens the way for the integration of linear video and direct-to-consumer streaming services expected to offer more value to Warner Bros. Discovery, Inc. (NASDAQ:WBD) customers. The updated deal includes increased fees Charter will pay to carry Warner Bros.
In addition to growing its subscriber base, Warner Bros direct-to-consumer (DTC) division is just beginning to expand internationally and increase its advertising revenue. The stock was held by 48 hedge funds in Q2 2024.
Here is what Bonhoeffer Capital Management said about Warner Bros. Discovery, Inc. (NASDAQ:WBD) in its first quarter 2024 investor letter:
In remembrance of Charlie Munger, I listened to and read his investment speeches in Poor Charlie’s Almanac. His speech to the University of Southern California business school specifically dealt with the application of worldly wisdom to investment management and business. There were five ideas presented by Munger in that speech which are particularly relevant in the Bonhoeffer portfolio. First, over the long term, it’s hard for a stock to earn more than the underlying business earns. As an illustration of this principle, we examined two firms, Old Dominion Freight Line (ODFL) and Warner Bros. Discovery, Inc. (NASDAQ:WBD).
WBD is an example of a value stock whose value has been impaired by a declining intrinsic value over time. Historically, WBD has been consolidating media content and distribution firms. However, the media content and distribution industry has been fragmenting over the past 20 years, with many new competitors and lower barriers to entry. Based upon Morningstar’s estimates, WBD is almost always undervalued, but stock price declined by 13.4% per year less than intrinsic value which declined by 5% per year, which is still a disaster compared to the index which increased by 12.7% per year. The average RoE was 7.2% and was declining through the period and ended negative. The chart below shows both the stock and Morningstar’s estimate of its intrinsic value over time.
These trends of growth and their effects on returns are reflected in the new investments we have invested in and those firms we have sold recently. We have sold most of our telecom and media firms (which have had flat to declining intrinsic values over time). These firms have been replaced by consolidating capital light distribution firms and specialized financial services firms (which have had increased intrinsic value over time) one of which is described below.
4. Lululemon Athletica Inc. (NASDAQ:LULU)
Year to Date Gain: -42.33%
Number of Hedge Fund Holders: 45
Lululemon Athletica Inc. (NASDAQ:LULU) is turning out to be one of the worst-performing NASDAQ stocks in 2024 amid growing concerns about its financial performance in a slowing retail environment. The company pausing the sale of its new Breezethrough collection and stating plans to make design adjustments rattled the investment community.
Investors have been dumping the stock in response to the company’s slowing growth, mainly because of challenging macroeconomic conditions. The high interest rate environment, compounded by inflation, has hurt consumer purchasing power, making it difficult for Lululemon to enjoy robust revenue growth.
Sales in Lululemon Athletica Inc. (NASDAQ:LULU) major markets and among its target demographic, women, have abruptly slowed after experiencing tremendous growth during the pandemic. Sales have slowed amid stiff competition from other clothing companies that are also selling high-end yoga and athleisure gear.
While the company delivered solid second-quarter results, with revenues increasing 7% to $2.4 billion, slow growth in core markets is taking a significant toll on its sentiments. Lululemon Athletica Inc. (NASDAQ:LULU) is seeing sluggish growth in the core markets of America, where sales were down by 3% in the second quarter.
Amid the struggles, Lululemon is still making profits. It is also in the same situation as other expensive clothing manufacturers. Given that there is no indication that the brand is having problems, the company may resume producing higher sales figures as the economy improves. As of the second quarter, 45 hedge funds have invested $1.06 billion in the company.
Middle Coast Investing stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its Q2 2024 investor letter:
“I mentioned last quarter and higher above that I like buying quality stocks on sale. Lululemon Athletica Inc. (NASDAQ:LULU), the 2nd worst performer in the S&P 500 this year, qualifies. I published a full thesis on the stock before its most recent earnings, but the basics: the yoga pants and clothing company has had an amazing post pandemic run that is approaching its end. Its growth in the U.S. is slow/non-existent at the moment, but it is growing very fast in China and Europe. I think that international growth is likely to endure, and that its U.S. slowness is likely to be temporary. Lululemon shares are not ‘cheap’, but they are on sale for an average price, and I think the company will grow faster than average over the next five years. I would be wrong if Lululemon is a fad gone bust, or faces a huge post-pandemic hangover as people get used to leaving the house more. We’ll see.”
3. DexCom, Inc. (NASDAQ:DXCM)
Year to Date Gain: -44.34%
Number of Hedge Fund Holders: 64
Dexcom is a healthcare company that designs, develops, and commercializes continuous glucose monitoring (CGM) systems. Its products include Dexcom G6 and Dexcom G7, integrated CGM systems for diabetes management.
The stock sank by nearly 40% mid-year after the diabetes management company delivered disappointing second-quarter results and offered weak guidance. While the company posted a 15% increase in revenue to $1 billion, it still missed estimates of $1.04 billion.
In addition to the revenue miss, Dexcom’s projected revenue of between $975 million and $1 billion for the third quarter did not sit well with investors. The situation was exacerbated by a reduction of full-year guidance to between $4 billion and $4.05 billion from a previous guidance of between $4.20 billion and $4.35 billion.
The slow growth has been attributed to fewer new customers and lower revenue per user, which is taking a significant toll on the Dexcom revenue base. Additionally, the company is struggling in the durable medical equipment segment.
While Dexcom is one of the worst-performing stocks in 2024, having lost about 44.34% year to date, its business is not in distress. The fact that the company delivered a 15% increase in revenue in Q2 underscores the fact that there is still growth.
The company’s long-term outlook remains intact, given that it produces and sells continuous glucose monitors (CGMs) that help people with diabetes track their glucose levels. Given the increasing number of people with diabetes worldwide, there will always be a ready market for the company’s products.
In the second quarter of 2024, 64 hedge funds tracked by Insider Monkey held stakes in the stock. Among these, the largest stakeholder was Holocene Advisors, which owned 1.77 million shares valued at approximately $201.05 million.
Here’s what Artisan Partners said about DexCom, Inc. (NASDAQ:DXCM) in its Q2 2024 investor letter:
“Dexcom detracted from performance in the quarter as the stock price gave back all the strong gains from the first quarter of this year. The company reported strong first quarter earnings, beating consensus estimates for the top and bottom lines, highlighted by 25% organic revenue growth. Additionally, it raised the low end of full-year revenue guidance based on the strong start to the year, with record new patient starts. Dexcom is launching an over-the-counter continuous glucose monitoring device set to target the over 25 million Type 2 diabetes patients who are not dependent on insulin. Furthermore, the medical device company recently expanded its salesforce to better address the ~200K primary care physicians in the United States. We see several catalysts going forward, and the stock is trading at a discount to historical valuation metrics.”
2. Moderna, Inc. (NASDAQ:MRNA)
Year to Date Gain: -49.18%
Number of Hedge Fund Holders: 39
Investors once favored Moderna Therapeutics in the healthcare industry due to the strong demand for COVID-19 vaccines. However, not anymore. It is turning out to be one of the worst-performing NASDAQ stocks in 2024, having shed 49.18% in market value.
The company announcing expensive cost cuts that could affect its pipeline programs and terminate others underline trouble in paradise. Moderna, Inc. (NASDAQ:MRNA) has already announced plans to slash its research and development expenditure by up to $1.1 billion, raising concerns about its ability to strengthen its pipeline.
Additionally, management warnings that it could take some time before the company bounces back to profitability underlines why the stock has been under pressure for the better part of the year.
Since demand for the company’s coronavirus vaccines declined significantly over the past two years, its fortunes have not been good. In the second quarter of this year, its quarterly revenue reached $241 million, a 95% decline over the previous three years.
On the other hand, Moderna, Inc. (NASDAQ:MRNA) is laying a strong foundation that might support its long-term prospect. Starting with more recent approvals, Moderna has received approval for an RSV vaccine and is expected to introduce at least one more product in the coming years. In a phase 3 study, the company’s coronavirus/flu vaccine performed better. It produced greater immune responses in its late-stage trial than some individual vaccines in both categories.
Even though Moderna’s current financial results don’t inspire confidence, a robust pipeline of vaccines affirms a potential bounce back after the recent slump. In total, 39 hedge funds were long Moderna, Inc. (NASDAQ:MRNA) in the second quarter, with a total stake value of $1.3 billion.
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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