Intel Shares Soar Despite Bumpy Road Ahead
The chip giant Intel (INTC) surprised investors with better-than-expected fourth-quarter guidance, sending its shares up nearly 7% in after-market trading on Thursday. CEO Pat Gelsinger expressed optimism about the company’s future, stating, “This was a critical quarter for us, and I think it gives optimism for what is to come.”
A Critical Quarter for Intel
However, upon closer inspection, the quarterly results reveal a more complex picture. Intel reported a staggering $15.9 billion in total non-cash charges related to inventory write-downs and lower performance expectations for certain businesses, including autonomous driving firm Mobileye (MBLY), where it owns a majority stake. The company’s operating loss at Intel Foundry, its upstart chipmaking business, reached $5.8 billion on $4.4 billion in sales.
Cost-Cutting Plans and Funding Challenges
Despite these challenges, Intel remains committed to its $10 billion cost-cutting plan and is exploring alternative sources of funding to support its chipmaking ambitions. Gelsinger emphasized that no deal is imminent regarding external funding. The company is pushing forward with plans to open chipmaking plants in Ohio and Arizona, despite not receiving billions of dollars in funding from the CHIPS Act.
CHIPS Act Delays Frustrate Intel
Gelsinger expressed frustration with the delays in receiving funding from the CHIPS Act, stating, “It’s well over two years since the CHIPS Act passed, and over that period, I’ve invested $30 billion in US manufacturing, and we’ve seen $0 from the CHIPS Act. This has taken too long; we need to get it finished.”
Wall Street Remains Cautious
Despite Intel’s efforts, Wall Street analysts remain skeptical about the company’s ability to turn itself around and compete with rivals like Nvidia (NVDA), AMD (AMD), and Taiwan’s TSMC (TSM). Goldman Sachs analyst Toshiya Hari believes Intel faces an “uphill battle” to catch up with its competitors, particularly in AI chip technology.
Intel’s Relationship with TSMC Clarified
Gelsinger also clarified Intel’s relationship with TSMC, stating that the company is both a customer and a competitor with a “great partnership.” He acknowledged that TSMC has been critical to Intel’s success, particularly with the Lunar Lake AI PC project.
Financial Performance
Intel’s shares have plummeted 55% year-to-date. The company reported a 6% decline in net sales to $13.3 billion, with adjusted gross margin falling to 18%. Adjusted EPS came in at -$0.46, a significant drop from the previous year’s $0.41.
Looking Ahead
Despite the challenges, Intel remains committed to its goals. As Gelsinger stated, “We want to be a Western foundry at scale, and we think that’s seminally important for the western world.” With the company’s future uncertain, investors will be watching closely to see if Intel can overcome its obstacles and regain its footing in the competitive chip market.
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