Can Intel Regain Its Former Glory?
The once-stable semiconductor giant Intel has struggled to keep pace with its rivals over the past decade. Despite being the world’s largest producer of x86 central processing units (CPUs) for PCs and servers, Intel’s stock has declined by 26% in the past 10 years, while AMD’s stock has skyrocketed by 5,220%. What went wrong, and can Intel bounce back to generate significant gains for investors?
A Shift in Market Share
According to PassMark Software, Intel’s share of the x86 CPU market has shrunk from 82.2% to 61% between 2016 and 2024, while AMD’s share has doubled from 17.8% to 35.7%. Intel’s production delays, chip shortages, and shifting strategies under three different CEOs have contributed to its decline.
The Process Race
Intel manufactures most of its chips in-house, but AMD outsources production to third-party foundries like TSMC and Samsung. Intel fell behind TSMC and Samsung in the “process race” to manufacture smaller, denser, and more power-efficient chips. This delay has cost Intel dearly, as AMD has developed a new generation of Ryzen CPUs for PCs and Epyc CPUs for servers.
Missing Key Technological Shifts
Intel’s failure to gain a foothold in the mobile chip market and its CPUs becoming less relevant than Nvidia’s graphics processing units (GPUs) in the booming AI market have further eroded its market share.
New Leadership, New Strategy
Pat Gelsinger, who became Intel’s CEO in 2021, initially dismissed the idea of following AMD’s lead and becoming a “fabless” chipmaker. However, Intel has since outsourced some production to TSMC and announced plans to spin off its foundry unit into an independent subsidiary.
A Path to Recovery?
Despite its struggles, analysts expect Intel’s revenue and EPS to grow at a CAGR of 4% and 29%, respectively, from 2023 to 2026. This recovery could be driven by the stabilization of the PC market, rising chip yields, and Intel’s efforts to reduce expenses.
Valuation Concerns
At $25, Intel trades at 29 times its projected earnings for 2026, while AMD trades at 31 times its 2026 earnings. With those valuations, it’s hard to see why anyone would pick Intel over AMD right now.
Stable Blue Chip or Hypergrowth Stock?
In a best-case scenario, Intel’s sales and profits could stabilize, its cash flow could stay positive, and it could reinstate its dividend. However, it’s unlikely to deliver the same level of growth as AMD, and its stock is unlikely to double or triple in the next few years.
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