Is It Time For Investors To Move On From Intel?

Intel has been in a slump and many investors are wondering if it’s time for them to cash out on this old reliable.

Nov. 17, 2020

In October, Intel (NASDAQ: INTC) shares fell 14.5% following the release of its third-quarter report. While the price had recovered from a blip earlier in 2020 over delays to its latest-generation chips, this latest slump is testing the patience of investors.

Intel’s recent issues

For the third quarter, Intel’s data center revenue fell 7%, with overall data-centric chips dropping by 10%. These results were worse than initially anticipated, with many government and enterprise clients cutting down on their IT spending as a result of the COVID-19 pandemic. 

While its cloud sales did rise by 15%, this is a lower margin division. Following the release of these results, shares initially fell by 11%, with total revenue down 4% year-on-year.

The big hurdle for the company is the delays to its 7-nanometer processors until 2022 for computers and 2023 for servers. There is the potential that Intel may have to start relying on others for chip manufacturing. 

Intel is now falling behind competitors with no clear plan to fix this from management. While Intel holds a significant market share in data centers and PCs, further decreases will be worrying. Year-to-date (YTD), Intel’s share price is down about 25%. 

Are there better alternatives?

There are a number of competitors eyeing up Intel’s market position in a variety of sectors. The ongoing uncertainty with the business and delays to key projects do not inspire confidence. Nvidia has been taking advantage of its flexible and fast approach in the graphics processing units (GPUs) space. It also made a significant $40 billion acquisition of Arm Holdings in September that will greatly improve the data center side of its business. Nvidia’s share price is up 163% for the past 12 months and it certainly looks to be in a more advantageous position for growth than Intel.

Intel’s competitor in the chip-making market, Advanced Micro Devices, already has 7-nanometer chips rolled out for PCs, as well as graphics cards. There has been strong demand for its range of processors, with new gaming consoles only adding to it. 

In AMD’s third-quarter, revenue rose 56% year-on-year, with the company stating that it has gained market share on Intel in the client CPU market for a 12th successive quarter. For the last 52-week period, the company is up by 112% and there looks like plenty more room for growth as it takes on Intel.

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