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The divergence between Intel (INTC) and Nvidia (NVDA) couldn’t be starker. While Jensen Huang-led NVDA is the best-performing S&P 500 Index ($SPX) stock, with YTD gains of over 114%, INTC is the worst performer, and has lost over 60% of its market cap. Intel's underperformance has been a long-term phenomenon, but things have been particularly bleak this year, after the company's Q2 earnings release spooked investors and the stock had its worst day in five decades.
In absolute terms, Intel stock trades just below $20, while its market cap is about $84 billion. In this article, we’ll discuss why Intel stock is so low, while other chipmakers have raced ahead.
Why Is Intel Stock So Low?
Typically, stocks are low because of a higher outstanding share count, massive underperformance, or splits – or a combination of these factors. As for Intel, the last split it did was way back in 2000, so the possibility of it being low due to a split is ruled out. Nvidia, incidentally, completed a 10-for-1 stock split earlier this year after the stellar rally in its stock,
Intel, on the other hand, completed four 2-for-1 stock splits between 1995 and 2000. That, as investors will recall, was during the dot-com boom, and names like Intel rallied amid the euphoria. That bubble eventually burst, and Intel is among those dot-com era companies that never recovered to those price levels.
Specifically, Intel hit an all-time high of $75.81 per share on Aug. 23, 2000, and currently trades at about a quarter of that price level. That’s about as bad as returns can get from a company in nearly a quarter of a century. Simply put, Intel’s stock price is so low because the stock hasn’t given any returns to investors, apart from the dividend that it suspended after the massive Q2 loss.
Intel’s Market Cap Compared to Other Chip Companies
While absolute price levels can be influenced by splits, market cap might be a better indicator to gauge how depressed the stock is. Intel’s market cap is just about $85 billion, while Nvidia commands a mammoth market cap of $2.6 trillion. The chip designing company’s market cap topped $3 trillion earlier this year, and it edged out Apple (AAPL) and Microsoft (MSFT) to become the world’s biggest company – albeit briefly.
Advanced Micro Devices (AMD) commands a market cap of over $215 billion, while Taiwan Semiconductor Manufacturing Company (TSM) – with whom Intel wants to compete with its foundry business – has a market cap of more than $700 billion.
Nvidia Only Recently Surpassed Intel’s Revenues
While Nvidia’s market cap is almost 30 times that of Intel, it only recently surpassed Intel’s revenues. In the trailing 12 months, Intel generated revenues of $55.12 billion while the corresponding numbers for NVDA, TSM, and AMD are $77.7 billion, $74.97 billion, and $23.27 billion, respectively.
Notably, while these companies’ revenues have been growing at a brisk pace – especially in Nvidia’s case – Intel’s revenues have been sliding, and its 2023 revenues were almost 25% lower than what they were in 2019.
As for Intel’s bottom line, the lesser said the better, and last year its GAAP net income fell 79% to a mere $1.7 billion. Among others, the company’s foundry business, which generated an operating loss of a whopping $7 billion last year, contributed to the steep fall in profits.
Intel’s Valuation Multiples Trail Peers
Intel’s valuation multiples also trail other companies in the chip industry. For instance, its next 12-month (NTM) price-to-sales multiple is 1.57x, while AMD and NVDA respectively trade at 7.4x and 19.6x. The low valuation multiples are reflective of the market’s pessimism towards the company. While Intel has been working on its IDM 2.0 transformation, and in a nutshell wants to be a combination of Nvidia and TSM, the path hasn’t been easy so far.
Intel’s NTM price-to-earnings (PE) of 52.6x is higher than both Nvidia and AMD. However, it’s because of tepid expectations for Intel’s earnings. Wall Street analysts are modeling earnings per share of -$0.39 from Intel this year amid the company’s woes. Low earnings over the next few quarters have bumped up INTC’s PE multiple.
To sum it up, sagging topline growth, tepid profitability, and low valuations are the reasons Intel stock is so low.
How Did Things Get So Bad for Intel?
Intel became the world’s biggest chipmaker in 1992 and held that position for years. However, the company’s dominance took a hit as the chipmaking industry gradually shifted to Asia.
Intel has missed many buses over the years, including the smartphone (and iPhone) revolution. More recently, Intel - like other chip companies - lost out to Nvidia, which capitalized on the artificial intelligence (AI) boom.
The company is currently fighting for relevance as companies like AMD and Nvidia are also eating up Intel’s market share in its core personal computer (PC) market.
Comparisons have already been drawn between Intel and other fallen giants like Nokia (NOK), Kodak (KODK), and Blackberry (BB), which once held dominant positions in their respective industries but are now pale shadows of their glorious pasts. While I believe Intel is not in that league – at least, not yet – CEO Pat Gelsinger has his task cut out for him as he tries to turn around the once-iconic U.S. enterprise.
On the date of publication, Mohit Oberoi had a position in: INTC , NVDA , AAPL , MSFT . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
