Intel Corporation’s stock (NASDAQ: INTC) witnessed a substantial 4.3% decline in trading value on Tuesday, despite the company’s unveiling of several positive product announcements at its Innovation Conference. This downturn comes as a surprise, given Intel’s recent strong performance, with the CEO hinting last month that the third quarter would surpass the midpoint of guidance.
During the conference, Intel emphasized its product momentum, most notably the revelation of a new Xeon data center processor set to launch on December 14th of this year. The tech giant also introduced an innovative advanced packaging technology named Universal Chiplet Interconnect Express (UCIe), which is poised to gain significance as chipmakers increasingly embrace chiplet architectures for AI accelerators and other cutting-edge processors.
Furthermore, Intel reiterated its dedication to artificial intelligence (AI) by announcing plans to construct a full AI supercomputer using its Gaudi AI accelerators and Xeon processors. The startup Stability.ai was identified as a customer for this project, which will also incorporate groundbreaking open-source software development tools for AI.
However, investor optimism may have been tempered by comments made by Intel’s CFO, David Zinsner, during the conference. Zinsner acknowledged that while the company remains on course for the next quarter, it anticipates a year-over-year decline in data center revenue. He also disclosed Intel’s aim to achieve cash flow breakeven by the end of the following year, news that may have left some investors less than enthusiastic.
Although there were hopes for a swifter recovery in Intel’s core PC market and data center growth based on recent favorable remarks at industry conferences, these expectations were set relatively low. This suggests that investors might need to exercise patience before witnessing substantial profit growth.
While Intel has lagged behind its sector in recent years, its turnaround strategy seems to be progressing as planned. Nonetheless, the company’s gross margins are not anticipated to return to their historical 60% or higher until it regains process leadership, a milestone projected for 2025. Consequently, Intel is likely to encounter more startup costs and expenditures through 2024, which could potentially impact profits, even if end markets rebound from their current lows.
Despite Tuesday’s disappointing performance, Intel’s stock may hold long-term promise if the company successfully executes its strategy, particularly considering its current market capitalization is lower than that of its main competitors.
