We recently published a list of Jim Cramer is Talking About These 10 Stocks Amid Global Selloff. Since Intel Corp (NASDAQ:INTC) ranks 7th on the list, it deserves a deeper look.
Jim Cramer in his latest program on CNBC talked about the brutal market selloff of Monday and said days like these could make you “cry yourself to sleep.” Cramer said that this “nasty” selloff was expected.
“It’s exactly what you’d expect at this point in the rate cycle, the point where the Fed is about to start cutting rates to bolster the economy. But the economy is going down,” Cramer said.
Cramer said that the Monday selloff was “vicious enough” to make any investor think why they should stay in the market, but that’s exactly “what you have to do.” He thinks the latest decline is a buying opportunity for long-term investors.
Jim Cramer said that the selloff started because money managers who were borrowing money from Japan to invest in US stocks were caught with their “pants down” when Japan increased interest rates. As a result, these funds were forced to sell their stocks. He thinks it’s not possible to call a bottom on this decline yet “until we know these sellers are done unwinding their trades.”
Cramer said that another key reason why investors were selling on Monday was the notion that the Fed is late on cutting rates. But Cramer said a 25 bps rate cut wouldn’t have mattered a lot and if Fed Chair Jerome Powell sees there is a need for an urgent rate cut, he’d do it.
“He’s got horse sense,” Cramer said.
Jim Cramer said there are no “safe havens” in tech and while he reiterated his bullish view on some notable tech stocks, he advised investors to be ready for “pain” in the near term if they want to invest in technology.
“If you can’t take the pain, then get the heck out of it.”
For this article we watched several latest programs of Jim Cramer and picked 10 important stocks he’s talking about. With each stock we have mentioned the number of hedge fund investors. Why are we interested in 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).
Intel Corp (NASDAQ:INTC)
Number of Hedge Fund Investors: 77
Cramer reminded investors that he warned them about Intel Corp (NASDAQ:INTC) “again and again and again….” He highlighted that the company missed the latest quarter on “all fronts” and suspended its dividend.
“It is not safe,” Cramer said of Intel Corp (NASDAQ:INTC).
Intel Corp (NASDAQ:INTC) shares recently saw a bloodbath following the company’s weak Q2 results and disappointing guidance. The results show the AI growth everyone was talking about won’t come cheap. Intel Corp (NASDAQ:INTC) expects its gross margin in the third quarter to decline to 34.5% from 38.7% reported in the second quarter, which was a significant decline from the company’s expectation of 43.5%.
While Intel Corp (NASDAQ:INTC) has suspended its dividend and announced massive layoffs, its problem of inventory won’t be resolved anytime soon. Intel has 137 days of inventory, worth over $11.2 billion. This is much higher than the industry average of 90 days. Intel Corp (NASDAQ:INTC) has close to $52 billion in long-term debt and analysts believe its cost-cutting measures along with AI growth initiatives won’t let it fix this problem soon. S&P Global recently put the stock’s credit rating on “watch” saying:
“While these cost-cutting measures, including significant capital expenditure reductions, could alleviate some near-term cash-flow-generation challenges, it is unclear whether these steps will be sufficient to maintain its business competitiveness and enable healthy growth.”
Raymond James said in a report after earnings that Intel’s margin issues are expected to continue until 2025. AI PC growth has become a larger headwind for margins, as the higher cost of external wafers offsets modest average selling price premiums.
Amid these factors, investors are better off looking for other AI stocks and avoiding Intel for now until there’s visibility on how exactly Intel Corp (NASDAQ:INTC) would resolve its core problems.
ClearBridge Large Cap Value Strategy stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q2 2024 investor letter:
“The massive ramp up in spending on AI spending has crowded out spending in other technology verticals such as software and traditional enterprise infrastructure. This has also driven a market where “AI winners” have enjoyed strong multiple expansion, while perceived “AI losers” have been severely punished. One example of a perceived AI loser temporarily cast aside was the Strategy’s top detractor for the quarter, Intel Corporation (NASDAQ:INTC), whose shares declined as it put out financial targets for 2027 that were below Wall Street expectations, and also noted that demand for its core PC and server chips remained depressed. We take a contrarian view of Intel and do not think it will be an AI loser, but rather see underappreciated opportunity as AI PCs ramp over the next few quarters in enterprises, where Intel has a stronghold. We also believe that the company’s technology roadmap remains intact, which we believe will lead to a stabilization in market share in its core PC and server markets. Both markets remain depressed, but we believe that aging infrastructure and the ongoing growth of IT workloads will lead to a cyclical recovery in both markets, which should benefit shares.”
Overall, Intel Corp (NASDAQ:INTC) ranks 7th on Insider Monkey’s list titled Jim Cramer is Talking About These 10 Stocks Amid Global Selloff. While we acknowledge the potential of Intel Corp (NASDAQ:INTC), 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.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
