5. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Investors: 75
Jim Cramer discussed Intel Corporation (NASDAQ:INTC)’s financial situation after reading the company’s recent releases. He emphasized that fixing the balance sheet should be the top priority, as Intel appears to have more money going out than coming in over the next year. While the much-talked-about deal with Amazon Web Services for next-generation AI chips is significant, it comes with hefty costs for capital equipment, and Intel Corporation (NASDAQ:INTC) currently lacks the funds to fully realize these ambitions.
Cramer pointed out that the most important news from Intel Corporation (NASDAQ:INTC)’s announcements wasn’t the AWS deal, but rather the suspension of plans to build large facilities in Germany and Poland.
“First thing we do is fix the balance sheet. That’s what I thought when I read the various releases issued by Intel last night, including one meant to alleviate balance sheet concerns. The company seems to have much more money going out than coming in over the next 12 months. Of course, what everyone is talking about is Intel’s deal with Amazon Web Services to provide them with next-generation chips for AI. I know it’s a big win, but it requires Intel to spend a fortune on capital equipment. Unfortunately, right now, Intel doesn’t have the money to build out everything it wants to or even what it’s committed to building.
That’s why the best news we got last night wasn’t the AWS deal; it was Intel’s suspension of its plan to build gigantic plants in Germany, which were expected to cost as much as €30 billion, and in Poland, which was to cost €4.6 billion. This pause is causing great turmoil, especially since the German government committed €10 billion to Intel to get that facility up and running. It was a linchpin of Germany’s attempt to support job growth, especially in the semiconductor space. Now that the auto industry has cooled, these actions are being taken to buy time.”
With new leadership, Intel Corporation (NASDAQ:INTC) is undergoing a major restructuring to improve operational efficiency and manufacturing capabilities, focusing on its foundry services to better compete with rivals like TSMC and Samsung.
In its recent Q2 2024 earnings report, Intel Corporation (NASDAQ:INTC) reported revenues of $13.2 billion, a 10% increase from the previous year, along with an adjusted earnings per share (EPS) of $0.50, surpassing analyst expectations and signaling a recovery from past downturns. Intel Corporation (NASDAQ:INTC) plans to launch new products, including its 14th Gen Core processors and advanced server chips, aimed at regaining market share in consumer and enterprise segments, especially in the growing AI and data center markets.
Intel Corporation (NASDAQ:INTC)’s significant investments in AI technologies and high-performance computing demonstrate its commitment to these key growth areas, highlighted by the announcement of its Gaudi AI chip. Partnerships with major tech firms like Microsoft and Google enhance its technology offerings and support broader adoption of Intel Corporation (NASDAQ:INTC)’s innovations. Recent product launches and plans to expand manufacturing in the U.S. and Europe align with global semiconductor demand trends, positioning Intel Corporation (NASDAQ:INTC) for strong growth and recovery in a competitive market.
Ariel Global Fund stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q2 2024 investor letter:
“Alternatively, several positions weighed on performance. One of the world’s largest semiconductor chip manufacturers by revenue, Intel Corporation (NASDAQ:INTC), underperformed in the period on news of a longer than expected turnaround in profitability within the Foundry business. This was exacerbated by disappointing near-term guidance due to a weakening demand environment signaling an extended replacement cycle.
We view the quarter as a temporary trough that should dissipate as we see signs of a cyclical recovery for personal computers (PCs) and central processing units (CPUs), driven by the Windows 11 upgrade. In our view, the market is overlooking the progress Intel is making to advance its manufacturing process. Not to mention, the company’s efforts to serve as a viable second source foundry partner of leading-edge silicon.
We believe the separation of the design and manufacturing businesses will be a key catalyst in unlocking improved financial performance while also enhancing the competitiveness of the foundry business.”
