Intel's Q1 2024 Results Magnify Further Woes Ahead

4
Comment
Favorite

Intel's Q1 2024 Results Magnify Further Woes Ahead

seekingalpha04-26

The Intel stock has lost over a quarter of its value this year, making it one of the worst-performing stocks in the semiconductor index.Intel's valuation divergence from peers continue to reflect ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Report

Comment

Success88
·04-26
This is why$Taiwan Semiconductor Manufacturing(TSM)$ TSMC technology has surpassed Intel's. TSMC have hardworking and dedicated employees, their corporate cultures might differ. TSMC: Known for a culture that emphasizes long hours and meeting deadlines. Employees willing to put in extra hours to achieve goals. Intel: Employees might prioritize a work-life balance. Before 5pm standby to leave the company
Reply
1
Report

Most Discussed

7x24

All

Terms and Conditions·Privacy Policy

Company: TTMF Limited. Tech supported by Xiangshang Yixin.

Email：uservice@ttm.financial

{"i18n":{"language":"en_US"},"data":{"share":"https://ttm.financial/m/news/2430656162?lang=en_US&edition=fundamental","thumbnail":"","is_english":true,"pubTime":"2024-04-26 10:47","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2430656162","market":"us","top_or_hot":-1,"title":"Intel's Q1 2024 Results Magnify Further Woes Ahead","media":"seekingalpha","content":"<div>\n<p>The Intel stock has lost over a quarter of its value this year, making it one of the worst-performing stocks in the semiconductor index.Intel's valuation divergence from peers continue to reflect ...</p>\n\n<a href=\"https://seekingalpha.com/article/4686435-intels-q1-2024-results-magnify-further-woes-ahead\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Intel's Q1 2024 Results Magnify Further Woes Ahead</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nIntel's Q1 2024 Results Magnify Further Woes Ahead\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-26 10:47 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4686435-intels-q1-2024-results-magnify-further-woes-ahead><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The Intel stock has lost over a quarter of its value this year, making it one of the worst-performing stocks in the semiconductor index.Intel's valuation divergence from peers continue to reflect ...</p>\n\n<a href=\"https://seekingalpha.com/article/4686435-intels-q1-2024-results-magnify-further-woes-ahead\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU1712237335.SGD","symbol_name":"Natixis Mirova Global Sustainable Equity H-R-NPF/A SGD","start_time":0,"source_url":"https://seekingalpha.com/article/4686435-intels-q1-2024-results-magnify-further-woes-ahead","article_id":"2430656162","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2430656162","pubTimestamp":1714099671,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"The Intel stock has lost over a quarter of its value this year, making it one of the worst-performing stocks in the semiconductor index.Intel's valuation divergence from peers continue to reflect incr","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU1712237335.SGD":"Natixis Mirova Global Sustainable Equity H-R-NPF/A SGD","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","BK4588":"碎股","LU0316494557.USD":"FRANKLIN GLOBAL FUNDAMENTAL STRATEGIES \"A\" ACC","BK7504":"锂钴概念","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","LU0289961442.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"AX\" (SGD) ACC","BK4141":"半导体产品","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","BK4551":"寇图资本持仓","BK7095":"多种金属与采矿","LU0127658192.USD":"EASTSPRING INVESTMENTS GLOBAL TECHNOLOGY \"A\" (USD) ACC","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","BK4573":"虚拟现实","LU0109391861.USD":"富兰克林美国机遇基金A Acc","LU1316542783.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD","LU2491049909.HKD":"WELLINGTON SUSTAINABLE OUTCOMES \"A\" (HKD) ACC","LU2458330169.SGD":"FRANKLIN SHARIAH TECHNOLOGY \"A\" (SGD) ACC","BK4549":"软银资本持仓","LU2491050071.SGD":"WELLINGTON SUSTAINABLE OUTCOMES \"A\" (SGDHDG) ACC","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU2458330243.SGD":"FRANKLIN SHARIAH TECHNOLOGY \"A-H1\" (SGDHDG) ACC","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","BK4548":"巴美列捷福持仓","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","LU0541502299.USD":"ALLSPRING  EMERGING MARKETS EQUITY \"I\" (USD) ACC","LU0072462426.USD":"贝莱德全球配置 A2","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","LU0080751232.USD":"富达环球多元动力基金A","LU0234572021.USD":"高盛美国核心股票组合Acc","SG9999000418.SGD":"Aberdeen Standard Global Technology SGD","BK4567":"ESG概念","INTC":"英特尔","LU0353189763.USD":"ALLSPRING  US ALL CAP GROWTH FUND \"I\" (USD) ACC","LU1242518931.SGD":"Fullerton Lux Funds - Asia Absolute Alpha A Acc SGD","BK4566":"资本集团","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","BK4587":"ChatGPT概念","BK4575":"芯片概念","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","LU0511384066.AUD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (AUDHDG) ACC","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD"},"translate_title":"英特尔Q1 2024的结果进一步放大了未来的困境","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"INTC":1.1},"content_text":"The Intel stock has lost over a quarter of its value this year, making it one of the worst-performing stocks in the semiconductor index.Intel's valuation divergence from peers continue to reflect increasing execution risks given rising company-specific woes, spanning extended Foundry losses, limited data center AI processor share gains, and an elevated China exposure.Taken together, the Intel stock continues to face a wide-ranging plate of downside risks with limited room for near-term respite.JHVEPhotoIntel Corporation stock has lost more than a quarter of its value this year. It has become one of the worst performing stocks in the Philadelphia Semiconductor Index (SOX), while peers continue to benefit from ongoing artificial intelligence (\"AI\") momentum.Much of Intel’s valuation decline had followed its recent presentation of a previously planned segment update, which entailed breaking out the performance reporting for its foundry business – Intel Foundry. Specifically, the update had magnified the extent of anticipated losses ahead for Intel Foundry – a key component of IDM 2.0 – before it becomes margin accretive for the company. This has largely brought back elevated execution risks for Intel.Meanwhile, limited market share gains from Intel’s Gaudi accelerators amid the recent AI rout is also feeding fear that the company will, once again, miss out on establishing leadership amid a key growth opportunity. This would essentially resemble the delayed go-to-market timeline for the Sapphire Rapids Xeon server CPUs, which shipped into a cyclical slowdown that caused Intel to cede market share to Advanced Micro Devices (AMD).While Intel’s latest Q1 earnings results continue to highlight its benefit from the gradual recovery in key consumer end-markets – particularly client computing products – the Data Center and AI (“DCAI”) segment remains a laggard compared to peers by wide margins. This suggests Intel’s continued struggles in gaining AI-related market share, raising expectations for the next-generation Gaudi 3 accelerators that will start shipping in Q3. And although Intel Foundry continues to make progress in increasing lifetime deal value and customer commitments amid improving process technologies, the longer-than-expected timeline to profitability remains a risk factor for consideration.The latest results are modest, at best, with no material upside changes to its previous roadmap. This accordingly provides limited headroom for valuation gains in the near-term to compensate for profit headwinds at Intel Foundry. And the set-up is further exacerbated by ongoing uncertainties pertaining to the impact from Intel’s elevated China exposure as the region scales back on the use of foreign chips. Uncertainties also remain on the technological superiority of Intel’s upcoming 18A in its “five nodes in four years” roadmap, given variance from TSMC (TSM) management’s latest commentary.Taken together, we believe Intel continues to face increasing downside risks that have not yet been reflected in its valuation at current levels.Extended Foundry WoesDespite Intel Foundry’s 10% y/y decline in revenue during Q1, the unit continues to make positive progress in growing its lifetime deal value and customer commitments. Specifically, Intel Foundry has now secured a $15 billion lifetime deal pipeline from external customers. It has also secured commitments from six customers on the advanced 18A process that starts volume production later this year, up from five in the prior quarter. The unit has also remained on track in delivering Intel’s five nodes in four years commitment, with 18A starting volume productions later this year. This is further supplemented by Intel’s recent introduction of Intel 14A – the next-generation process node beyond the five nodes and four years program.However, this has done little in stemming concerns about the segment’s extended trajectory to profitability based on management’s recent presentation. Although Intel has rapidly grown its foundry business’ deal book to $15+ billion to date, the company does not expect the segment to breakeven until at least the midpoint between now and 2030. Specifically, the company expects Intel Foundry losses to peak at the end of the year as it nears completion of its five nodes in four years roadmap with the upcoming start of productions on the 18A process node. But margin expansion at scale is not expected until the end of the decade, when Intel targets 40% non-GAAP gross margins and 30% non-GAAP operating margins for the foundry segment.The latest update accordingly escalates execution risks on Intel’s capital-intensive IDM 2.0 turnaround strategy, which emphasizes the mission-critical role of the return to its foundry roots. The extended timeline to breakeven and profitability has essentially wiped-out previous optimism priced into the stock following consecutive quarters of improving growth in Intel Foundry Services. It is also consistent with our previous discussion that the market had been overly optimistic in late 2023 when Intel disclosed a prepayment from a notable chipmaker for its 18A capacity.Meanwhile, uncertainties also remain on whether Intel’s ambition to recover its technology leadership in chip fabrication will be achieved. Specifically, Intel’s upcoming debut of the 18A process node had been repeatedly lauded by management as the leading process technology in the industry.Yet, the current industry leader, TSMC, had recently cited its disagreements with the claim. Specifically, TSMC’s management has repeatedly reiterated that the company’s upcoming N3P node will offer better performance and cost efficiency than Intel 18A. The N3P process node, which builds on N3 (or 3nm) already ramping since late 2023, is expected to enter volume production on a similar timeline as Intel 18A later this year. TSMC also claims its next-generation N2 process, which starts volume production in 2025, will offer superior performance to its own N3P process and Intel 18A. Instead, TSMC suspects that near-term Intel 18A technology leadership may only materialize when applied to Intel’s very own products - which starts with next-generation client product \"Lunar Lake\" CPUs and Xeon \"Clearwater Forest\" server CPUs.The comment stays the same, so that they are new is the technology would be very similar or equivalent to TSMC's N3P. We further check again with all the specs or the possible published in technology, transistor technology and everything. My comment stays the same with a big advantage in the technology maturity. Because of, in 2025, when they say that their newest technology will be go on production. For TSMC, that will be the third year with a very high-volume production in the fabs.Source: TSMC 4Q23 Earnings Call Transcript.Intel also risks a capacity disadvantage to TSMC in ramping next-generation fabrication process technologies. Specifically, TSMC currently remains a key foundry partner to Intel, with the latter having already outsourced an estimated $19 billion per year in volumes to the former.Meanwhile, Intel has recently disclosed a $15 billion external deal pipeline for Intel Foundry, while only about five chipmakers having committed to the 18A process node. Yet recent industry reports suggest that Intel may not even have sufficient 20A and 18A capacity at initial ramp to address its own needs for the roll-out of next-generation Arrow Lake and Lunar Lake client CPUs, and Clearwater Forest server processors. This accordingly dials up risks of additional outsourcing to TSMC, which could further deviate Intel Foundry’s already-prolonged trajectory to profitability and dampen the luster on the unit’s technological advantage.Elevated Exposure to Structural Demand RisksIn addition to continued uncertainties on Intel’s’ newly revived foundry business – the key component to IDM 2.0 – the Intel Products business also faces increasingly structural demand risks. Following the peak cyclical downturn observed last year, PC demand has continued to show signs of gradual recovery. This is consistent with continued y/y acceleration in Intel’s Client Computing Group (“CCG”), despite sequential seasonality weakness. We believe the growing introduction of AI PCs into the market would become a reinforcement to Intel’s near-term CCG momentum as well. Specifically, AI PC shipments are expected to reach as much as 50 million units by the end of the year and account for about a fifth of the anticipated total shipment mix. This also bodes favorably with CCG’s leadership in client CPUs, as well as its recent introduction of the Core Ultra processor, which features built-in AI capabilities.However, Intel’s PC leadership risks inherent exposure to the segment’s lengthened upgrade cycle. Specifically, CCG revenues continue to account for a ballooning mix of Intel’s consolidated sales at 59%, and represent the company’s largest business. Meanwhile, improving technology and asset life expectancy is inherently extending PC replacement and upgrade cycles. Without further diversification from the core CCG revenue stream, Intel continues to face elevated risks of downside cyclical changes in the slow-growing PC demand environment.In addition to PC demand headwinds, Intel’s significant reliance on server CPU sales at its DCAI segment also potentially increases its exposure to increasingly structural downside risk. As discussed in our previous coverage, general purpose data centers fitted with CPUs are gradually migrating to accelerated computing given increasingly complex workloads like AI training and inferencing. This is corroborated by anticipated DCAI revenue declines this year, given slow growth of 5% y/y observed in Q1.The situation also elevates expectations for Gaudi 3’s demand outlook as it starts shipping in Q3. Management has recently disclosed a $2 billion pipeline for its newest accelerator, which boasts competitive performance and total cost of ownership when compared to Nvidia’s (NVDA) best-selling H100 and H200 GPUs. Yet, this continues to trail demand observed in its rivals over recent quarters by wide margins, highlighting the urgency for Intel to bolster its market share in the high-growth accelerator market.Brewing China HeadwindsIntel’s elevated revenue exposure in China is also a downside risk that has likely yet to be considered in the stock’s current valuation. While the U.S. export curbs have disrupted Intel’s growth outlook, its China revenue mix has not changed significantly. Specifically, China remains Intel’s largest market, consistently representing about 27% of the chipmaker’s annual revenues.In the latest development, China has name-dropped Intel in its recent call for government agencies and state-backed organizations to refrain from the use of foreign microprocessors in their servers and computers. With more than a quarter of its revenues currently generated from the Chinese market, we believe Intel is more prone to the adverse regulatory changes. This compares to peers that have significantly reduced their exposure following the U.S. export curbs last year. For instance, AMD has reduced its share of China revenues from 25% before the implementation of U.S. export curbs, to 22% in 2022 and, more drastically, to 15% in 2023.China’s upcoming curtailment of foreign chip use will likely be further exacerbated by the upcoming expiry of Intel’s exclusive arrangement with Huawei later this year. We believe this remains a significant risk to Intel’s near-term outlook, which investors have yet to consider and price into the stock’s valuation prospects.Specifically, Intel has long benefitted from an exclusive export license to Huawei, which bypasses restrictions on the Entity List, from the Trump Administration in 2019. Intel currently supplies more than 90% of Huawei’s CPUs for client PC applications, rising from about 53% before receiving the exclusive export license. The exclusive arrangement has also allowed Intel to out earn rival AMD by more than half a billion dollars in relevant CPU sales to Huawei, according to an internal presentation. This gives Intel exposure to Huawei’s 9% market share in China’s PC market, which has rapidly expanded lately given interest in its “MateBook” series of laptops.consumer.huawei.comPotential loss of its current exclusive export license to Huawei upon expiry could also lead to further adverse implications for Intel’s slow recovering PC business. The exclusive license for Intel to sell its chips to Huawei is set to expire later this year. And renewal prospects are highly unlikely. The Biden Administration has already failed in an earlier attempt to revoke the license earlier this year.Meanwhile, Commerce Secretary Gina Raimondo has also recently committed to “do whatever it takes” to restrict China’s technological advances at the expense of U.S. homegrown developments. This could mean an impending revenue headwind of hundreds of millions of dollars for Intel starting 2025, which further dampens its outlook.Fundamental and Price ConsiderationsAdjusting our previous forecast for Intel’s actual Q1 results and forward outlook, we expect the company to grow revenue by 8% y/y to $58.5 billion in 2024. We expect the increasing mix of Intel Foundry revenues to be a near-term headwind on profitability, given anticipated ramp-up costs within the foreseeable future. Meanwhile, the anticipated softness in higher margin DCAI revenues will likely exacerbate margin expansion limitations in the near-term.AuthorIn the downside scenario, Intel’s slow-growing outlook will likely become exacerbated by further China revenue erosion in the coming years. In a sensitivity analysis that we had performed and shared in detail with our marketplace subscribers, we believe Intel’s forecast China revenues in the base case could be reduced by a discount factor of as much as 50% given impending regulatory and geopolitical woes. This would accordingly reduce China’s share of Intel revenues to about 16% - a similar extent of reduction observed at peers like AMD over the past year. Under this set-up, Intel’s valuation risks further diminishment to our price target of $28 apiece, which represents further downside potential of -13% from about $32 apiece observed post-earnings (April 25 post-market trading).ConclusionDespite gradual improvements observed in Intel’s fundamental outlook, its foundry unit’s extended trajectory to profitability delays accretion to its IDM 2.0 investment returns. And this risks being further exacerbated by an uncertain company-specific demand outlook, alongside rising China woes. Although the stock trades discounted to peers at current levels, further declines in post-earnings trading underscores returning investors’ angst on Intel’s outlook. Particularly, given our view that Intel Corporation’s China risk exposure has yet to be fully priced in, alongside limited growth catalysts ahead, the stock could face further weakness over the near-term.Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":0},"commentList":[{"id":299314936500312,"gmtCreate":1714101159715,"gmtModify":1714101164573,"author":{"id":"4101948424484190","authorId":"4101948424484190","name":"Success88","avatar":"https://static.itradeup.com/news/4408e1a22d73e99adb53aa65dde8ad91","vip":1,"hat":"https://static.tigerbbs.com/b0a2963eb37c60c5d6d4a8dbcd266952","crmLevel":3,"crmLevelSwitch":0},"htmlText":"This is why<a href=\"https://ttm.financial/S/TSM\">$Taiwan Semiconductor Manufacturing(TSM)$&nbsp;</a><v-v data-views=\"1\"></v-v>&nbsp;TSMC technology has surpassed Intel's. TSMC have hardworking and dedicated employees, their corporate cultures might differ. TSMC: Known for a culture that emphasizes long hours and meeting deadlines. Employees willing to put in extra hours to achieve goals. Intel: Employees might prioritize a work-life balance. Before 5pm standby to leave the company&nbsp;","listText":"This is why<a href=\"https://ttm.financial/S/TSM\">$Taiwan Semiconductor Manufacturing(TSM)$&nbsp;</a><v-v data-views=\"1\"></v-v>&nbsp;TSMC technology has surpassed Intel's. TSMC have hardworking and dedicated employees, their corporate cultures might differ. TSMC: Known for a culture that emphasizes long hours and meeting deadlines. Employees willing to put in extra hours to achieve goals. Intel: Employees might prioritize a work-life balance. Before 5pm standby to leave the company&nbsp;","text":"This is why$Taiwan Semiconductor Manufacturing(TSM)$ TSMC technology has surpassed Intel's. TSMC have hardworking and dedicated employees, their corporate cultures might differ. TSMC: Known for a culture that emphasizes long hours and meeting deadlines. Employees willing to put in extra hours to achieve goals. Intel: Employees might prioritize a work-life balance. Before 5pm standby to leave the company","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/299314936500312","repostId":2430656162,"repostType":4,"repost":{"id":"2430656162","pubTimestamp":1714099671,"share":"https://www.laohu8.com/m/news/2430656162?lang=&edition=full","pubTime":"2024-04-26 10:47","market":"us","language":"en","title":"Intel's Q1 2024 Results Magnify Further Woes Ahead","url":"https://stock-news.laohu8.com/highlight/detail?id=2430656162","media":"seekingalpha","summary":"The Intel stock has lost over a quarter of its value this year, making it one of the worst-performing stocks in the semiconductor index.Intel's valuation divergence from peers continue to reflect incr","content":"<html><head></head><body><ul style=\"\"><li><p>The Intel stock has lost over a quarter of its value this year, making it one of the worst-performing stocks in the semiconductor index.</p></li><li><p>Intel&#39;s valuation divergence from peers continue to reflect increasing execution risks given rising company-specific woes, spanning extended Foundry losses, limited data center AI processor share gains, and an elevated China exposure.</p></li><li><p>Taken together, the Intel stock continues to face a wide-ranging plate of downside risks with limited room for near-term respite.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/84030b6a8a7a9dfead8e937193679cc7\" alt=\"JHVEPhoto\" title=\"JHVEPhoto\" tg-width=\"750\" tg-height=\"500\"/><span>JHVEPhoto</span></p><p><strong>Intel Corporation</strong> stock has lost more than a quarter of its value this year. It has become one of the worst performing stocks in the Philadelphia Semiconductor Index (SOX), while peers continue to benefit from ongoing artificial intelligence (&#34;AI&#34;) momentum.</p><p>Much of Intel’s valuation decline had followed its recent presentation of a previously planned segment update, which entailed breaking out the performance reporting for its foundry business – Intel Foundry. Specifically, the update had magnified the extent of anticipated losses ahead for Intel Foundry – a key component of IDM 2.0 – before it becomes margin accretive for the company. This has largely brought back elevated execution risks for Intel.</p><p>Meanwhile, limited market share gains from Intel’s Gaudi accelerators amid the recent AI rout is also feeding fear that the company will, once again, miss out on establishing leadership amid a key growth opportunity. This would essentially resemble the delayed go-to-market timeline for the Sapphire Rapids Xeon server CPUs, which shipped into a cyclical slowdown that caused Intel to cede market share to Advanced Micro Devices (AMD).</p><p>While Intel’s latest Q1 earnings results continue to highlight its benefit from the gradual recovery in key consumer end-markets – particularly client computing products – the Data Center and AI (“DCAI”) segment remains a laggard compared to peers by wide margins. This suggests Intel’s continued struggles in gaining AI-related market share, raising expectations for the next-generation Gaudi 3 accelerators that will start shipping in Q3. And although Intel Foundry continues to make progress in increasing lifetime deal value and customer commitments amid improving process technologies, the longer-than-expected timeline to profitability remains a risk factor for consideration.</p><p>The latest results are modest, at best, with no material upside changes to its previous roadmap. This accordingly provides limited headroom for valuation gains in the near-term to compensate for profit headwinds at Intel Foundry. And the set-up is further exacerbated by ongoing uncertainties pertaining to the impact from Intel’s elevated China exposure as the region scales back on the use of foreign chips. Uncertainties also remain on the technological superiority of Intel’s upcoming 18A in its “five nodes in four years” roadmap, given variance from TSMC (TSM) management’s latest commentary.</p><p>Taken together, we believe Intel continues to face <strong>increasing downside risks</strong> that have not yet been reflected in its valuation at current levels.</p><h2 id=\"id_4181947693\">Extended Foundry Woes</h2><p>Despite Intel Foundry’s 10% y/y decline in revenue during Q1, the unit continues to make positive progress in growing its lifetime deal value and customer commitments. Specifically, Intel Foundry has now secured a $15 billion lifetime deal pipeline from external customers. It has also secured commitments from six customers on the advanced 18A process that starts volume production later this year, up from five in the prior quarter. The unit has also remained on track in delivering Intel’s five nodes in four years commitment, with 18A starting volume productions later this year. This is further supplemented by Intel’s recent introduction of Intel 14A – the next-generation process node beyond the five nodes and four years program.</p><p>However, this has done little in stemming concerns about the segment’s extended trajectory to profitability based on management’s recent presentation. Although Intel has rapidly grown its foundry business’ deal book to $15+ billion to date, the company does not expect the segment to breakeven until at least the midpoint between now and 2030. Specifically, the company expects Intel Foundry losses to peak at the end of the year as it nears completion of its five nodes in four years roadmap with the upcoming start of productions on the 18A process node. But margin expansion at scale is not expected until the end of the decade, when Intel targets 40% non-GAAP gross margins and 30% non-GAAP operating margins for the foundry segment.</p><p>The latest update accordingly escalates execution risks on Intel’s capital-intensive IDM 2.0 turnaround strategy, which emphasizes the mission-critical role of the return to its foundry roots. The extended timeline to breakeven and profitability has essentially wiped-out previous optimism priced into the stock following consecutive quarters of improving growth in Intel Foundry Services. It is also consistent with our previous discussion that the market had been overly optimistic in late 2023 when Intel disclosed a prepayment from a notable chipmaker for its 18A capacity.</p><p>Meanwhile, uncertainties also remain on whether Intel’s ambition to recover its technology leadership in chip fabrication will be achieved. Specifically, Intel’s upcoming debut of the 18A process node had been repeatedly lauded by management as the leading process technology in the industry.</p><p>Yet, the current industry leader, TSMC, had recently cited its disagreements with the claim. Specifically, TSMC’s management has repeatedly reiterated that the company’s upcoming N3P node will offer better performance and cost efficiency than Intel 18A. The N3P process node, which builds on N3 (or 3nm) already ramping since late 2023, is expected to enter volume production on a similar timeline as Intel 18A later this year. TSMC also claims its next-generation N2 process, which starts volume production in 2025, will offer superior performance to its own N3P process and Intel 18A. Instead, TSMC suspects that near-term Intel 18A technology leadership may only materialize when applied to Intel’s very own products - which starts with next-generation client product &#34;Lunar Lake&#34; CPUs and Xeon &#34;Clearwater Forest&#34; server CPUs.</p><blockquote><p>The comment stays the same, so that they are new is the technology would be very similar or equivalent to TSMC&#39;s N3P. We further check again with all the specs or the possible published in technology, transistor technology and everything. My comment stays the same with a big advantage in the technology maturity. Because of, in 2025, when they say that their newest technology will be go on production. For TSMC, that will be the third year with a very high-volume production in the fabs.</p><p><em>Source: TSMC 4Q23 Earnings Call Transcript</em>.</p></blockquote><p>Intel also risks a capacity disadvantage to TSMC in ramping next-generation fabrication process technologies. Specifically, TSMC currently remains a key foundry partner to Intel, with the latter having already outsourced an estimated $19 billion per year in volumes to the former.</p><p>Meanwhile, Intel has recently disclosed a $15 billion external deal pipeline for Intel Foundry, while only about five chipmakers having committed to the 18A process node. Yet recent industry reports suggest that Intel may not even have sufficient 20A and 18A capacity at initial ramp to address its own needs for the roll-out of next-generation Arrow Lake and Lunar Lake client CPUs, and Clearwater Forest server processors. This accordingly dials up risks of additional outsourcing to TSMC, which could further deviate Intel Foundry’s already-prolonged trajectory to profitability and dampen the luster on the unit’s technological advantage.</p><h2 id=\"id_1117541299\">Elevated Exposure to Structural Demand Risks</h2><p>In addition to continued uncertainties on Intel’s’ newly revived foundry business – the key component to IDM 2.0 – the Intel Products business also faces increasingly structural demand risks. Following the peak cyclical downturn observed last year, PC demand has continued to show signs of gradual recovery. This is consistent with continued y/y acceleration in Intel’s Client Computing Group (“CCG”), despite sequential seasonality weakness. We believe the growing introduction of AI PCs into the market would become a reinforcement to Intel’s near-term CCG momentum as well. Specifically, AI PC shipments are expected to reach as much as 50 million units by the end of the year and account for about a fifth of the anticipated total shipment mix. This also bodes favorably with CCG’s leadership in client CPUs, as well as its recent introduction of the Core Ultra processor, which features built-in AI capabilities.</p><p>However, Intel’s PC leadership risks inherent exposure to the segment’s lengthened upgrade cycle. Specifically, CCG revenues continue to account for a ballooning mix of Intel’s consolidated sales at 59%, and represent the company’s largest business. Meanwhile, improving technology and asset life expectancy is inherently extending PC replacement and upgrade cycles. Without further diversification from the core CCG revenue stream, Intel continues to face elevated risks of downside cyclical changes in the slow-growing PC demand environment.</p><p>In addition to PC demand headwinds, Intel’s significant reliance on server CPU sales at its DCAI segment also potentially increases its exposure to increasingly structural downside risk. As discussed in our previous coverage, general purpose data centers fitted with CPUs are gradually migrating to accelerated computing given increasingly complex workloads like AI training and inferencing. This is corroborated by anticipated DCAI revenue declines this year, given slow growth of 5% y/y observed in Q1.</p><p>The situation also elevates expectations for Gaudi 3’s demand outlook as it starts shipping in Q3. Management has recently disclosed a $2 billion pipeline for its newest accelerator, which boasts competitive performance and total cost of ownership when compared to Nvidia’s (NVDA) best-selling H100 and H200 GPUs. Yet, this continues to trail demand observed in its rivals over recent quarters by wide margins, highlighting the urgency for Intel to bolster its market share in the high-growth accelerator market.</p><h2 id=\"id_1137858031\">Brewing China Headwinds</h2><p>Intel’s elevated revenue exposure in China is also a downside risk that has likely yet to be considered in the stock’s current valuation. While the U.S. export curbs have disrupted Intel’s growth outlook, its China revenue mix has not changed significantly. Specifically, China remains Intel’s largest market, consistently representing about 27% of the chipmaker’s annual revenues.</p><p>In the latest development, China has name-dropped Intel in its recent call for government agencies and state-backed organizations to refrain from the use of foreign microprocessors in their servers and computers. With more than a quarter of its revenues currently generated from the Chinese market, we believe Intel is more prone to the adverse regulatory changes. This compares to peers that have significantly reduced their exposure following the U.S. export curbs last year. For instance, AMD has reduced its share of China revenues from 25% before the implementation of U.S. export curbs, to 22% in 2022 and, more drastically, to 15% in 2023.</p><p>China’s upcoming curtailment of foreign chip use will likely be further exacerbated by the upcoming expiry of Intel’s exclusive arrangement with Huawei later this year. We believe this remains a significant risk to Intel’s near-term outlook, which investors have yet to consider and price into the stock’s valuation prospects.</p><p>Specifically, Intel has long benefitted from an exclusive export license to Huawei, which bypasses restrictions on the Entity List, from the Trump Administration in 2019. Intel currently supplies more than 90% of Huawei’s CPUs for client PC applications, rising from about 53% before receiving the exclusive export license. The exclusive arrangement has also allowed Intel to out earn rival AMD by more than half a billion dollars in relevant CPU sales to Huawei, according to an internal presentation. This gives Intel exposure to Huawei’s 9% market share in China’s PC market, which has rapidly expanded lately given interest in its “MateBook” series of laptops.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ddd19d8b335e4d4ef199a69fc4d26257\" tg-width=\"640\" tg-height=\"273\"/></p><p>consumer.huawei.com</p><p>Potential loss of its current exclusive export license to Huawei upon expiry could also lead to further adverse implications for Intel’s slow recovering PC business. The exclusive license for Intel to sell its chips to Huawei is set to expire later this year. And renewal prospects are highly unlikely. The Biden Administration has already failed in an earlier attempt to revoke the license earlier this year.</p><p>Meanwhile, Commerce Secretary Gina Raimondo has also recently committed to “do whatever it takes” to restrict China’s technological advances at the expense of U.S. homegrown developments. This could mean an impending revenue headwind of hundreds of millions of dollars for Intel starting 2025, which further dampens its outlook.</p><h2 id=\"id_1050361471\">Fundamental and Price Considerations</h2><p>Adjusting our previous forecast for Intel’s actual Q1 results and forward outlook, we expect the company to grow revenue by 8% y/y to $58.5 billion in 2024. We expect the increasing mix of Intel Foundry revenues to be a near-term headwind on profitability, given anticipated ramp-up costs within the foreseeable future. Meanwhile, the anticipated softness in higher margin DCAI revenues will likely exacerbate margin expansion limitations in the near-term.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c65cf0d5eeca2ccd9b70445710538127\" alt=\"Author\" title=\"Author\" tg-width=\"640\" tg-height=\"139\"/><span>Author</span></p><p>In the downside scenario, Intel’s slow-growing outlook will likely become exacerbated by further China revenue erosion in the coming years. In a sensitivity analysis that we had performed and shared in detail with our marketplace subscribers, we believe Intel’s forecast China revenues in the base case could be reduced by a discount factor of as much as 50% given impending regulatory and geopolitical woes. This would accordingly reduce China’s share of Intel revenues to about 16% - a similar extent of reduction observed at peers like AMD over the past year. Under this set-up, Intel’s valuation risks further diminishment to our price target of <strong>$28 apiece</strong>, which represents further downside potential of -13% from about $32 apiece observed post-earnings (April 25 post-market trading).</p><h2 id=\"id_2476010973\">Conclusion</h2><p>Despite gradual improvements observed in Intel’s fundamental outlook, its foundry unit’s extended trajectory to profitability delays accretion to its IDM 2.0 investment returns. And this risks being further exacerbated by an uncertain company-specific demand outlook, alongside rising China woes. Although the stock trades discounted to peers at current levels, further declines in post-earnings trading underscores returning investors’ angst on Intel’s outlook. Particularly, given our view that Intel Corporation’s China risk exposure has yet to be fully priced in, alongside limited growth catalysts ahead, the stock could face further weakness over the near-term.</p><p>Editor&#39;s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Intel's Q1 2024 Results Magnify Further Woes Ahead</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nIntel's Q1 2024 Results Magnify Further Woes Ahead\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-26 10:47 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4686435-intels-q1-2024-results-magnify-further-woes-ahead><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The Intel stock has lost over a quarter of its value this year, making it one of the worst-performing stocks in the semiconductor index.Intel's valuation divergence from peers continue to reflect ...</p>\n\n<a href=\"https://seekingalpha.com/article/4686435-intels-q1-2024-results-magnify-further-woes-ahead\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU1712237335.SGD":"Natixis Mirova Global Sustainable Equity H-R-NPF/A SGD","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","BK4588":"碎股","LU0316494557.USD":"FRANKLIN GLOBAL FUNDAMENTAL STRATEGIES \"A\" ACC","BK7504":"锂钴概念","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","LU0289961442.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"AX\" (SGD) ACC","BK4141":"半导体产品","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","BK4551":"寇图资本持仓","BK7095":"多种金属与采矿","LU0127658192.USD":"EASTSPRING INVESTMENTS GLOBAL TECHNOLOGY \"A\" (USD) ACC","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","BK4573":"虚拟现实","LU0109391861.USD":"富兰克林美国机遇基金A Acc","LU1316542783.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD","LU2491049909.HKD":"WELLINGTON SUSTAINABLE OUTCOMES \"A\" (HKD) ACC","LU2458330169.SGD":"FRANKLIN SHARIAH TECHNOLOGY \"A\" (SGD) ACC","BK4549":"软银资本持仓","LU2491050071.SGD":"WELLINGTON SUSTAINABLE OUTCOMES \"A\" (SGDHDG) ACC","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU2458330243.SGD":"FRANKLIN SHARIAH TECHNOLOGY \"A-H1\" (SGDHDG) ACC","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","BK4548":"巴美列捷福持仓","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","LU0541502299.USD":"ALLSPRING  EMERGING MARKETS EQUITY \"I\" (USD) ACC","LU0072462426.USD":"贝莱德全球配置 A2","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","LU0080751232.USD":"富达环球多元动力基金A","LU0234572021.USD":"高盛美国核心股票组合Acc","SG9999000418.SGD":"Aberdeen Standard Global Technology SGD","BK4567":"ESG概念","INTC":"英特尔","LU0353189763.USD":"ALLSPRING  US ALL CAP GROWTH FUND \"I\" (USD) ACC","LU1242518931.SGD":"Fullerton Lux Funds - Asia Absolute Alpha A Acc SGD","BK4566":"资本集团","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","BK4587":"ChatGPT概念","BK4575":"芯片概念","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","LU0511384066.AUD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (AUDHDG) ACC","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD"},"source_url":"https://seekingalpha.com/article/4686435-intels-q1-2024-results-magnify-further-woes-ahead","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2430656162","content_text":"The Intel stock has lost over a quarter of its value this year, making it one of the worst-performing stocks in the semiconductor index.Intel's valuation divergence from peers continue to reflect increasing execution risks given rising company-specific woes, spanning extended Foundry losses, limited data center AI processor share gains, and an elevated China exposure.Taken together, the Intel stock continues to face a wide-ranging plate of downside risks with limited room for near-term respite.JHVEPhotoIntel Corporation stock has lost more than a quarter of its value this year. It has become one of the worst performing stocks in the Philadelphia Semiconductor Index (SOX), while peers continue to benefit from ongoing artificial intelligence (\"AI\") momentum.Much of Intel’s valuation decline had followed its recent presentation of a previously planned segment update, which entailed breaking out the performance reporting for its foundry business – Intel Foundry. Specifically, the update had magnified the extent of anticipated losses ahead for Intel Foundry – a key component of IDM 2.0 – before it becomes margin accretive for the company. This has largely brought back elevated execution risks for Intel.Meanwhile, limited market share gains from Intel’s Gaudi accelerators amid the recent AI rout is also feeding fear that the company will, once again, miss out on establishing leadership amid a key growth opportunity. This would essentially resemble the delayed go-to-market timeline for the Sapphire Rapids Xeon server CPUs, which shipped into a cyclical slowdown that caused Intel to cede market share to Advanced Micro Devices (AMD).While Intel’s latest Q1 earnings results continue to highlight its benefit from the gradual recovery in key consumer end-markets – particularly client computing products – the Data Center and AI (“DCAI”) segment remains a laggard compared to peers by wide margins. This suggests Intel’s continued struggles in gaining AI-related market share, raising expectations for the next-generation Gaudi 3 accelerators that will start shipping in Q3. And although Intel Foundry continues to make progress in increasing lifetime deal value and customer commitments amid improving process technologies, the longer-than-expected timeline to profitability remains a risk factor for consideration.The latest results are modest, at best, with no material upside changes to its previous roadmap. This accordingly provides limited headroom for valuation gains in the near-term to compensate for profit headwinds at Intel Foundry. And the set-up is further exacerbated by ongoing uncertainties pertaining to the impact from Intel’s elevated China exposure as the region scales back on the use of foreign chips. Uncertainties also remain on the technological superiority of Intel’s upcoming 18A in its “five nodes in four years” roadmap, given variance from TSMC (TSM) management’s latest commentary.Taken together, we believe Intel continues to face increasing downside risks that have not yet been reflected in its valuation at current levels.Extended Foundry WoesDespite Intel Foundry’s 10% y/y decline in revenue during Q1, the unit continues to make positive progress in growing its lifetime deal value and customer commitments. Specifically, Intel Foundry has now secured a $15 billion lifetime deal pipeline from external customers. It has also secured commitments from six customers on the advanced 18A process that starts volume production later this year, up from five in the prior quarter. The unit has also remained on track in delivering Intel’s five nodes in four years commitment, with 18A starting volume productions later this year. This is further supplemented by Intel’s recent introduction of Intel 14A – the next-generation process node beyond the five nodes and four years program.However, this has done little in stemming concerns about the segment’s extended trajectory to profitability based on management’s recent presentation. Although Intel has rapidly grown its foundry business’ deal book to $15+ billion to date, the company does not expect the segment to breakeven until at least the midpoint between now and 2030. Specifically, the company expects Intel Foundry losses to peak at the end of the year as it nears completion of its five nodes in four years roadmap with the upcoming start of productions on the 18A process node. But margin expansion at scale is not expected until the end of the decade, when Intel targets 40% non-GAAP gross margins and 30% non-GAAP operating margins for the foundry segment.The latest update accordingly escalates execution risks on Intel’s capital-intensive IDM 2.0 turnaround strategy, which emphasizes the mission-critical role of the return to its foundry roots. The extended timeline to breakeven and profitability has essentially wiped-out previous optimism priced into the stock following consecutive quarters of improving growth in Intel Foundry Services. It is also consistent with our previous discussion that the market had been overly optimistic in late 2023 when Intel disclosed a prepayment from a notable chipmaker for its 18A capacity.Meanwhile, uncertainties also remain on whether Intel’s ambition to recover its technology leadership in chip fabrication will be achieved. Specifically, Intel’s upcoming debut of the 18A process node had been repeatedly lauded by management as the leading process technology in the industry.Yet, the current industry leader, TSMC, had recently cited its disagreements with the claim. Specifically, TSMC’s management has repeatedly reiterated that the company’s upcoming N3P node will offer better performance and cost efficiency than Intel 18A. The N3P process node, which builds on N3 (or 3nm) already ramping since late 2023, is expected to enter volume production on a similar timeline as Intel 18A later this year. TSMC also claims its next-generation N2 process, which starts volume production in 2025, will offer superior performance to its own N3P process and Intel 18A. Instead, TSMC suspects that near-term Intel 18A technology leadership may only materialize when applied to Intel’s very own products - which starts with next-generation client product \"Lunar Lake\" CPUs and Xeon \"Clearwater Forest\" server CPUs.The comment stays the same, so that they are new is the technology would be very similar or equivalent to TSMC's N3P. We further check again with all the specs or the possible published in technology, transistor technology and everything. My comment stays the same with a big advantage in the technology maturity. Because of, in 2025, when they say that their newest technology will be go on production. For TSMC, that will be the third year with a very high-volume production in the fabs.Source: TSMC 4Q23 Earnings Call Transcript.Intel also risks a capacity disadvantage to TSMC in ramping next-generation fabrication process technologies. Specifically, TSMC currently remains a key foundry partner to Intel, with the latter having already outsourced an estimated $19 billion per year in volumes to the former.Meanwhile, Intel has recently disclosed a $15 billion external deal pipeline for Intel Foundry, while only about five chipmakers having committed to the 18A process node. Yet recent industry reports suggest that Intel may not even have sufficient 20A and 18A capacity at initial ramp to address its own needs for the roll-out of next-generation Arrow Lake and Lunar Lake client CPUs, and Clearwater Forest server processors. This accordingly dials up risks of additional outsourcing to TSMC, which could further deviate Intel Foundry’s already-prolonged trajectory to profitability and dampen the luster on the unit’s technological advantage.Elevated Exposure to Structural Demand RisksIn addition to continued uncertainties on Intel’s’ newly revived foundry business – the key component to IDM 2.0 – the Intel Products business also faces increasingly structural demand risks. Following the peak cyclical downturn observed last year, PC demand has continued to show signs of gradual recovery. This is consistent with continued y/y acceleration in Intel’s Client Computing Group (“CCG”), despite sequential seasonality weakness. We believe the growing introduction of AI PCs into the market would become a reinforcement to Intel’s near-term CCG momentum as well. Specifically, AI PC shipments are expected to reach as much as 50 million units by the end of the year and account for about a fifth of the anticipated total shipment mix. This also bodes favorably with CCG’s leadership in client CPUs, as well as its recent introduction of the Core Ultra processor, which features built-in AI capabilities.However, Intel’s PC leadership risks inherent exposure to the segment’s lengthened upgrade cycle. Specifically, CCG revenues continue to account for a ballooning mix of Intel’s consolidated sales at 59%, and represent the company’s largest business. Meanwhile, improving technology and asset life expectancy is inherently extending PC replacement and upgrade cycles. Without further diversification from the core CCG revenue stream, Intel continues to face elevated risks of downside cyclical changes in the slow-growing PC demand environment.In addition to PC demand headwinds, Intel’s significant reliance on server CPU sales at its DCAI segment also potentially increases its exposure to increasingly structural downside risk. As discussed in our previous coverage, general purpose data centers fitted with CPUs are gradually migrating to accelerated computing given increasingly complex workloads like AI training and inferencing. This is corroborated by anticipated DCAI revenue declines this year, given slow growth of 5% y/y observed in Q1.The situation also elevates expectations for Gaudi 3’s demand outlook as it starts shipping in Q3. Management has recently disclosed a $2 billion pipeline for its newest accelerator, which boasts competitive performance and total cost of ownership when compared to Nvidia’s (NVDA) best-selling H100 and H200 GPUs. Yet, this continues to trail demand observed in its rivals over recent quarters by wide margins, highlighting the urgency for Intel to bolster its market share in the high-growth accelerator market.Brewing China HeadwindsIntel’s elevated revenue exposure in China is also a downside risk that has likely yet to be considered in the stock’s current valuation. While the U.S. export curbs have disrupted Intel’s growth outlook, its China revenue mix has not changed significantly. Specifically, China remains Intel’s largest market, consistently representing about 27% of the chipmaker’s annual revenues.In the latest development, China has name-dropped Intel in its recent call for government agencies and state-backed organizations to refrain from the use of foreign microprocessors in their servers and computers. With more than a quarter of its revenues currently generated from the Chinese market, we believe Intel is more prone to the adverse regulatory changes. This compares to peers that have significantly reduced their exposure following the U.S. export curbs last year. For instance, AMD has reduced its share of China revenues from 25% before the implementation of U.S. export curbs, to 22% in 2022 and, more drastically, to 15% in 2023.China’s upcoming curtailment of foreign chip use will likely be further exacerbated by the upcoming expiry of Intel’s exclusive arrangement with Huawei later this year. We believe this remains a significant risk to Intel’s near-term outlook, which investors have yet to consider and price into the stock’s valuation prospects.Specifically, Intel has long benefitted from an exclusive export license to Huawei, which bypasses restrictions on the Entity List, from the Trump Administration in 2019. Intel currently supplies more than 90% of Huawei’s CPUs for client PC applications, rising from about 53% before receiving the exclusive export license. The exclusive arrangement has also allowed Intel to out earn rival AMD by more than half a billion dollars in relevant CPU sales to Huawei, according to an internal presentation. This gives Intel exposure to Huawei’s 9% market share in China’s PC market, which has rapidly expanded lately given interest in its “MateBook” series of laptops.consumer.huawei.comPotential loss of its current exclusive export license to Huawei upon expiry could also lead to further adverse implications for Intel’s slow recovering PC business. The exclusive license for Intel to sell its chips to Huawei is set to expire later this year. And renewal prospects are highly unlikely. The Biden Administration has already failed in an earlier attempt to revoke the license earlier this year.Meanwhile, Commerce Secretary Gina Raimondo has also recently committed to “do whatever it takes” to restrict China’s technological advances at the expense of U.S. homegrown developments. This could mean an impending revenue headwind of hundreds of millions of dollars for Intel starting 2025, which further dampens its outlook.Fundamental and Price ConsiderationsAdjusting our previous forecast for Intel’s actual Q1 results and forward outlook, we expect the company to grow revenue by 8% y/y to $58.5 billion in 2024. We expect the increasing mix of Intel Foundry revenues to be a near-term headwind on profitability, given anticipated ramp-up costs within the foreseeable future. Meanwhile, the anticipated softness in higher margin DCAI revenues will likely exacerbate margin expansion limitations in the near-term.AuthorIn the downside scenario, Intel’s slow-growing outlook will likely become exacerbated by further China revenue erosion in the coming years. In a sensitivity analysis that we had performed and shared in detail with our marketplace subscribers, we believe Intel’s forecast China revenues in the base case could be reduced by a discount factor of as much as 50% given impending regulatory and geopolitical woes. This would accordingly reduce China’s share of Intel revenues to about 16% - a similar extent of reduction observed at peers like AMD over the past year. Under this set-up, Intel’s valuation risks further diminishment to our price target of $28 apiece, which represents further downside potential of -13% from about $32 apiece observed post-earnings (April 25 post-market trading).ConclusionDespite gradual improvements observed in Intel’s fundamental outlook, its foundry unit’s extended trajectory to profitability delays accretion to its IDM 2.0 investment returns. And this risks being further exacerbated by an uncertain company-specific demand outlook, alongside rising China woes. Although the stock trades discounted to peers at current levels, further declines in post-earnings trading underscores returning investors’ angst on Intel’s outlook. Particularly, given our view that Intel Corporation’s China risk exposure has yet to be fully priced in, alongside limited growth catalysts ahead, the stock could face further weakness over the near-term.Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":4,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}