Intel Corporation (INTC Quick QuoteINTC - Free Report) has plunged 59.3% in the past year against the industry’s growth of 123.4%, lagging its peers Advanced Micro Devices, Inc. (AMD Quick QuoteAMD - Free Report) and NVIDIA Corporation (NVDA Quick QuoteNVDA - Free Report) . Much of this underperformance was due to severe financial difficulties and operational challenges, which forced management to undertake a comprehensive review of its businesses while implementing corporate restructuring in the top rungs. 

Intel has replaced CEO Pat Gelsinger with David Zinsner and Michelle Johnston Holthaus as the interim Co-CEOs. The company is mulling various options, including the potential split of its product design and manufacturing divisions and evaluating which factory projects should be terminated. It also plans to establish Intel Foundry as an independent subsidiary to unlock strategic benefits and improve capital efficiency with clearer separation and independence from the rest of Intel. The division incurred an operating loss of $5.8 billion in the last reported quarter.

One-Year Price Performance

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INTC Remains Focused on Core Strategy

Intel remains committed to its core strategy and has decided against tinkering the same to spur its growth momentum. The company reiterated its earlier revenue guidance of $13.3-$14.3 billion for the fourth quarter of 2024, emphasizing the diligent execution of operational goals to establish itself as a leading foundry.

However, management observed that the company needs to witness a significant cultural change to transition from Integrated Device Manufacturing to being a world-class foundry. This would involve a shift from a “no wafer left behind” mindset, wherein the company built extra capacity to meet demand (hoping that the added capacity would not be idle at any time), to a “no capital left behind” mindset that aims to drive efficiency by eking out every wafer possible from the existing capacity.

AI Chips, 5N4Y Progress: INTC’s Saving Grace? 

Intel has launched AI (Artificial Intelligence) chips for data centers and PCs. This marks one of the largest architectural shifts for the company in 40 years. The strategic decision is aimed at gaining a firmer footing in the expansive AI sector, spanning cloud and enterprise servers to networks, volume clients and ubiquitous edge environments, in tune with the evolving market dynamics.

The company remains on track with its 5N4Y (five nodes in four years) program to regain transistor performance and power performance leadership by 2025. Intel is making solid progress in Intel Xeon processors. Intel Xeon 6 processor with Efficient-cores (E-cores), code-named Sierra Forest, marks the company’s first Intel 3 server product architected for high-density, scale-out workloads. Intel Xeon 6 processors with Performance-cores (P-cores), code-named Granite Rapids, were launched in the third quarter of 2024, along with the Intel Gaudi 3 AI accelerator. 

The company launched Intel Core Ultra 200V series processors (formerly named Lunar Lake) during the third quarter and Arrow Lake after the end of the quarter, bringing the power of the AI PC to the desktop and paving the way for the launch of Panther Lake in the second half of 2025. Intel has also announced the launch of glass substrates for advanced chip packaging. This industry-leading product is likely to be available for mass consumption in the second half of this decade as it aims to deliver 1 trillion transistors on a package by 2030.

Too Little, Too Late for INTC?

The recent product launches appear “too little too late” for Intel. Although Intel has scaled its AI footprint, it appears to lag NVIDIA on the innovation front, with the latter’s H100 and Blackwell graphics processing units (GPUs) being runaway successes. Leading technology companies are reportedly piling up NVIDIA’s GPUs to build clusters of computers for their AI work, leading to exponential revenue growth. 

An accelerated ramp-up of AI PCs further affected the short-term margins of Intel as it shifted production to its high-volume facility in Ireland, where wafer costs are typically higher. Margins were also adversely impacted by higher charges related to non-core businesses, charges associated with unused capacity and an unfavorable product mix. 

Intel has been facing challenges due to the disruptive rise of over-the-top service providers in this dynamic industry. Price-sensitive competition for customer retention in the core business is expected to intensify in the coming days. Aggressive competition is likely to limit the ability to attract and retain customers and affect operating and financial results.

It appears that the road ahead for Intel is bumpy and strewn with daunting challenges. It remains to be seen how INTC will navigate these roadblocks in 2025. Intel carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.