Source: PaxForex Premium Analytics Portal, Fundamental Insight

Once reigning as the globe's foremost chipmaker, Intel now finds itself overshadowed. With a market value of just $180 billion, it pales in comparison to its rival Advanced Micro Devices, valued at $310 billion. Meanwhile, Nvidia has soared past both, boasting an astonishing market cap of $2.2 trillion.

Though still a dominant force in producing x86 CPUs for PCs and servers, Intel's path has been marred by a string of missed opportunities, production setbacks, and questionable decisions, alienating both customers and investors. Over the past five years, Intel's stock has plummeted by over 20%, while AMD and Nvidia have seen exponential growth, with their shares skyrocketing by 720% and 1,970%, respectively.

The pressing question now looms: Can Intel salvage its position and ascend to the ranks of trillion-dollar chipmakers by the decade's end? Or is it fated to be eclipsed as the semiconductor market expands and evolves, consigned to the annals of history?

Over the past decade, Intel has stumbled through three significant blunders. Firstly, it failed to leverage its dominance in the PC and data center sectors into the mobile market. Instead of embracing Arm's power-efficient CPU designs for smartphones, Intel persisted in scaling down its x86 CPUs meant for PCs, resulting in poorly received chips. This misstep allowed Arm-based chips to dominate over 95% of the smartphone market.

Secondly, Intel's own foundries lagged behind competitors like Samsung and Taiwan Semiconductor Manufacturing Company (TSMC) in the race to produce smaller, denser, and more energy-efficient chips. Losing ground in the manufacturing process, Intel fell behind AMD, which outsourced production to TSMC, offering cheaper and more efficient chips. Intel's own production delays and shortages further propelled its PC partners towards adopting AMD's offerings.

According to PassMark Software, Intel's share of the x86 CPU market plummeted from 82% to 61% between the fourth quarters of 2016 and 2023. Meanwhile, AMD doubled its share from 18% to 36%, making significant gains across desktops, laptops, and servers.

Intel's struggles over the past decade were compounded by several key missteps. Firstly, the company failed to foresee the potential of discrete GPUs in AI applications, ceasing production of its own in 2009 and ceding ground to Nvidia and AMD, which established dominance in the discrete GPU market. This oversight allowed GPUs to evolve from gaming chips into vital AI components for data centers. While Intel re-entered the discrete GPU arena in 2020, its market share remains a modest 1%, according to estimates by JPR.

During this tumultuous period, Intel saw turnover in its leadership, cycling through three CEOs in six years. The company's focus on divestments, cost-cutting measures, and buybacks over strategic investments contributed to a decline in annual revenue from $70.8 billion in 2018 to $54.2 billion in 2023, alongside a sharp drop in adjusted EPS from $4.58 to $1.05.

Upon assuming the CEO role in 2021, Pat Gelsinger shifted Intel's strategy away from cost-cutting towards aggressive spending to catch up to competitors like TSMC and Samsung. This involved substantial investments in expanding first-party foundries, acquiring advanced lithography systems from ASML, and opening up foundries to third-party chipmakers to compete directly in the contract chipmaking market. With approximately $15 billion in third-party deals secured and substantial government subsidies in the US and Europe, Intel aims to surpass TSMC and Samsung in the process race by 2025.

While ambitious, Intel's efforts are supported by forecasts of increased AI-oriented PC adoption, higher average selling prices for new PC and server chips, and tighter cost controls. The company aims to elevate its adjusted gross margin from 44% to 60% and expand its adjusted operating margin from 9% to 40% over the long term. Analysts anticipate adjusted EPS to grow by 28% in 2024 and 67% in 2025, assuming successful upgrades to manufacturing plants and economies of scale.

If Intel achieves these targets and maintains a steady compound annual growth rate (CAGR) of 25% from 2025 to 2030, adjusted earnings could reach $6.85 per share by 2030. Even with reasonable forward earnings multiple of 25, this would translate to a stock price of around $170, representing nearly a 300% increase from current levels. However, this would still leave Intel short of reaching a trillion-dollar market cap by 2030, even under the most optimistic scenario.

As long as the price is above 40.00, follow the recommendations below:

• Time frame: D1
• Recommendation: long position
• Entry point: 42.44
• Take Profit 1: 46.00
• Take Profit 2: 50.00

Alternative scenario:

If the 40.00 level is broken-down, follow the recommendations below:     

• Time frame: D1
• Recommendation: short position
• Entry point: 40.00
• Take Profit 1: 38.00
• Take Profit 2: 36.00