Title: A Surprise Move from Intel's Stock Market Performance
Over the past few years, semiconductor stocks have soared, with Nvidia and Advanced Micro Devices leading the charge, rising by 721% and 83%, respectively. In contrast, Intel, once a dominant player, has struggled, falling by 25% during this period. But is Intel's downturn a temporary setback, or is there potential for a comeback?
First, let's take a closer look at Intel's valuation. The chart below shows Intel's price-to-sales (P/S) ratio over the past three years. What jumps out is that it hit a low of around 1.5 sometime between August and September 2022. Interestingly, that was also the last time Intel's P/S ratio dipped that low, coincidentally in the same months in 2022.
Following this bottom, Intel's stock began to surge. Unfortunately, it retraced back to its lows during much of 2023. Some may believe that Intel has bottomed and that shares are primed for a repeat of their 2023 upward trajectory. However, history isn't always a reliable indicator of future performance. Instead, we need to look for concrete catalysts that could help Intel rebound.
So, what could these catalysts be? One significant catalyst is the CHIPS and Science Act, signed into law by President Biden on August 9, 2022. Intel has been a major beneficiary of CHIPS Act funding, having been awarded tens of billions of dollars in grants and loans. While this sounds promising, the actual funding can take a long time to receive. Also, usually, the original dollar amount is subject to change.
The delay in receiving this funding may have contributed to Intel's 2023 surge being fueled more by AI hype and optimism over the CHIPS Act, rather than reality. But despite the initial euphoria subsiding in 2024, there are still reasons to remain optimistic about Intel's potential rebound.
First, under the promise of bringing manufacturing jobs back to America, President-elect Trump campaigned heavily on domestic manufacturing. AI-powered chips are indeed in high demand, especially for the defense sector and the U.S. military, making Intel a crucial player.
Furthermore, Intel CEO Pat Gelsinger recently announced his retirement. Since joining Intel in 2021, Gelsinger has led a series of aggressive cost-cutting measures, including a 15% workforce reduction and the suspension of dividend payments. Although Gelsinger has had a shaky tenure, with Intel's stock posting a total return of -53%, a fresh start with new leadership under a new administration could be beneficial.
So, is Intel stock a buy right now? It's challenging to say with certainty. While the stock's P/S multiple has dipped and Intel is receiving substantial funding from the CHIPS Act, it's essential to wait for more concrete evidence of movement forward.
In conclusion, Intel could certainly rebound with the right catalysts, including continued government support, improved manufacturing capabilities, and strategic partnerships. Until then, we'll have to keep a vigilant eye on Intel's performance in 2025.
Investors might find potential in Intel's current situation, considering its low price-to-sales ratio and substantial funding from the CHIPS Act. However, it's crucial to exercise patience and wait for tangible signs of progress before making an investment decision.
By strategically investing in finance, individuals or organizations could potentially benefit from Intel's potential comeback if it manages to rebound with the aid of government support, improved manufacturing capabilities, and strategic partnerships.
