Intel shares hit 11-year low after 27% plunge

Intel shares hit 11-year low after 27% plunge

What peine to Intel for it to be worth the same as a decade ago? The company lost 27% in a single session, trading around $21, the same price as eleven years ago and far below its peak of $51. Meanwhile, AMD surpassed Intel in market capitalization for the first time. With this starting point, the market has split in two: those who see an investment floor and those who see a falling knife. The issue involves more numbers than the headline suggests.

Why has Intel's stock crashed?

Intel fell 27% in one day, dragged down by a punishment that returns it to prices from a decade ago. Behind this is not a single bad data point, but a pile of them: it has failed to dominate the chip business for years, missed the AI race, and its last two generations of desktop processors were disasters. Added to this is an extremely expensive industrial structure to maintain, with cleanrooms for wafer fabrication costing billions each. According to forum participants, Intel has at least three plants in the US, one in Mexico, another in Ireland, one under construction in Magdeburg (Germany), another in Israel, and some in Malaysia. No one disputes the bill. They dispute the price paid.

The argument for buying at these levels is simple: if factories will be operational in a few years, the stock won't be this cheap. The skeptics' argument is no less so: a chip manufacturing machine that doesn't sell enough only accumulates fixed costs.

P/E of 8 vs AMD's 35: Is Intel undervalued?

The most repeated reference is valuation: Intel trades with a P/E of 8 and AMD with 35, after the latter surpassed Intel in market cap for the first time. Some read this as a textbook undervaluation; others see confirmation that the market expects no growth. Technical analysis points in the same ambiguous direction: daily RSI was 13.76 and weekly 27.12, extreme oversold levels where some see a possible rebound.

Hence, some propose buying call options expiring near earnings reports to leverage implied volatility. Others place the next support zone at $18 and prefer to wait. And some argue the pre-crash price was already reasonable based on fundamentals, because ultimately financial data rules, not the latest chip.

The ghost of Global Foundries and the $22 billion loss

The precedent hovering over the discussion is factories that don't pay for themselves. AMD spun off its production facilities in 2008 to create Global Foundries and partner with Mubadala. In 2012, it sold its last stake, and until late 2021, when it went public, Mubadala lost $22 billion in the chip factory venture. Nine years of ruin.

Some conclude that building foundries is a ruinous business sustained only by public subsidies, and that Europe and the US will flood Intel with funds to reduce dependence on Asia.

Node 18A failed Broadcom tests

If there is one piece of news that cooled sentiment, it is Node 18A. According to published reports, Intel sent silicon wafers of this process to Broadcom, and tests yielded disappointing results, to the point that the process may not be ready for mass production. This is the kind of news that turns an industrial plan into a promise pending verification.

Added to this are failed attempts in SSDs and graphics cards, and the general impression that the company has been living on stories for half a decade. The response to the fiasco of the 12th and 13th generation processors takes a toll on fruta, while ARM architecture processors squeeze from below with mobile efficiency and desktop performance.

CEO buys 12,500 shares: signal or pocket change?

The CEO's purchase of 12,500 shares, about $240,000 for an executive earning $17 million annually, has been interpreted in two ways: as a gesture of confidence or as a PR move that barely covers legal advice fees. Meanwhile, there is the case of an individual who allegedly invested $700,000 from an inheritance.

The bullish thesis has a name and horizon: layoffs improve accounts, new factory startups bolster business, and the stock doubles from $20 to $40 in months. The bearish thesis also exists: turning Intel into just another dinosaur, with high fixed costs and no cutting-edge product, like other tech giants that never recovered.

There have been plays that worked out with the same pattern, companies that plummeted amid rumors of being finished and then multiplied their value, though entrants didn't catch the exact bottom. Waiting eleven years for Intel's turnaround is not a strategy; it's a biography. And whoever catches the bottom will have material to tell for another eleven years.