Intel ( INTC -6.12% ) The stock experienced another day of heavy selling on Thursday. By the end of the trading session, the chip company’s share price had decreased by 6.1%, as reported by data from S&P Global’s Market Intelligence Division .
Intel faced setbacks once more as investors considered the potential that the company might not move forward with building two semiconductor manufacturing facilities in Germany. There hasn’t been any official statement indicating that the construction plans have been scrapped, but investors remain uncertain about the project’s status.
The two fabrication plants were anticipated to become operational in 2027, with construction costs estimated at approximately $33 billion. The European Union is set to cover about one-third of these expenses. Although Intel has not offered much detail about the future of these facilities, Taiwan’s Company for Semiconductor Production revealed earlier this week that it had begun building a new $11 billion facility in Germany, with the European Union funding half of the expenses.
After today’s decline, Intel’s stock is now hovering just above its lowest point in a decade. Could this struggling company be an overlooked player in the field of artificial intelligence? AI ) a strategic move, or an outdated giant that won’t provide returns for investors?
Investing in Intel’s AI prospects involves accepting unpredictability.
Enhancing Intel’s production capabilities is now a significant economic and national security priority for the U.S., the E.U., and their allied nations. Although the company is likely to secure more government funding to construct new fabrication facilities, expanding its contract manufacturing operations is proving difficult. This is because constructing and sustaining these facilities requires huge capital investments, and Intel is currently undergoing a large-scale cost-reduction initiative. This initiative involves reducing its global workforce by 15%, halting its dividend payments, and divesting from certain investments.
Attempts to establish a strong presence as a top designer of high-performance processors for data centers have not been very successful so far. Additionally, the launch of AI PCs has led to reduced profit margins rather than the anticipated profit increase. Artificial intelligence has yet to significantly boost profits for the PC and server sectors, and the manufacturing division is incurring substantial expenses. Recently, Intel has been delivering a series of disappointing updates to investors, and there is little clarity on whether the company’s recovery plan will succeed.
The semiconductor company, with its stock having dropped 60% this year and 71% from its peak over the past decade, might attract investors willing to take risks in pursuit of high-reward opportunities. Intel still enjoys established business relationships and may receive government support to develop a strong contract manufacturing business. However, for those looking for indications of a successful turnaround or Intel’s leadership in AI, the company has yet to provide such evidence.
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