Intel Extends Losses as Analysts Say Chipmaker Faces ‘More Headwinds Than Tailwinds’

Intel (INTC) shares tumbled over 7% in intraday trading Wednesday, extending losses a day after the chipmaker reported a widening loss in its foundry business, with analysts saying they see “more headwinds than tailwinds” for the chipmaker in the first half of this year.

Intel reported Tuesday that its foundry or semiconductor manufacturing segment generated an operating loss of nearly $7 billion in 2023, widening from a loss of $5.17 billion in 2022. Its revenue at $18.91 billion in 2023 was lower than 2022’s $27.5 billion in sales. Intel suggested it could take until 2030 for the foundry business to reach break-even operating margins, longer than many investors anticipated.

“It was not pretty,” Rosenblatt analysts said, “but we applaud management for the chutzpah to admit that the Foundry business will take years to scale properly.” It was the first time Intel reported revenue totals for its foundry business alone, as part of the company’s transition strategy to operating its foundry business as a more independent unit.

Wedbush analysts pointed to concerns “around Intel’s ambition to achieve 60% GM/40% OM in 2030,” noting “while the target echoes Intel’s prior long-term model, the timing is 3-4 years subsequent to Intel’s prior expectation.”

Company executives had previously indicated that the company anticipated “peak startup costs in 2024” and that the majority of revenue would be realized in 2025 for the foundry segment.

Analysts also raised concerns that Intel could miss the “current semiconductor AI/up cycle” as an artificial intelligence (AI) boom boosts other semiconductor stocks like Nvidia (NVDA) and Advanced Micro Devices (AMD).

Bank of America analysts said that “competition (vs. NVDA, AMD, AVGO, TSMC, Samsung) remains tough and INTC’s topline still depends significantly on legacy/low-growth PC and traditional server CPU markets exposed to longer replacement cycles and challenged by emerging ARM-based rivals.”

The company is expected to report earnings for the first quarter of 2024 later this month on April 25, which could provide investors with additional insight into the company’s financials and outlook.

Intel shares were down 7.6% at $40.59 as of 2:20 p.m. ET Wednesday. They’ve lost about 15% of their value since the start of 2024.