Intel Stock’s Semiconductor Slump: A Sell Signal for Savvy Investors?

Stocks to sell

Intel (NASDAQ:INTC) stock is one many investors are watching.

Unlike peers in the high-performance chipmaking space, Intel’s focus on the PC and other consumer-focused markets can be viewed as a good or bad thing, depending on who you talk to.

The company is clearly now seeing challenges in central processing units for data centers and devices. The company seems affected by China’s export controls and tariffs. So, there’s plenty for long-term investors to consider at this point in time.

Notably, a brewing tariff war may pose key risks for companies with ties to the Chinese supply chain. Geopolitical tensions are rising, and these tensions have led to uncertainty regarding the impact of tariffs on Intel’s pricing and semiconductor stocks overall.

The stock dropped 13% on this news, validating the sell rating many analysts hold. Here’s why I think INTC stock could be among the laggards in the chip sector investors may not want to own long-term, particularly for those who are intently focused on the benefits of AI right now.

The Giants and INTC Stock

Major players like Microsoft (NASDAQ:MSFT) and Qualcomm (NASDAQ:QCOM) are challenging Intel’s dominance in PC chips with Arm-based models.

Intel has swiftly responded with its Lunar Lake series, aiming to outperform Snapdragon X chips. A number of experts continue to discuss the implications of such a battle, but it’s clear that increased competition in this space could eat into Intel’s previously high share of the market.

It will be interesting to see how this battle develops over time. Intel executives recently confirmed Lunar Lake’s production and projected shipping in the third quarter, with the next desktop processor, “Arrow Lake,” set for the fourth quarter of 2024.

More Layoffs

In keeping with tradition in the tech sector, Intel has joined the list of companies implementing layoffs. This latest round of layoffs will affect 62 employees at its Santa Clara headquarters in California, as part of a reorganization led by Chris Schell.

Intel’s Sales and Marketing Group underwent structural changes to align with company strategy, ensuring customer-centric outcomes. The company emphasized its commitment to supporting affected employees with dignity, and is certainly making small trims around the edges.

However, it remains to be seen if these job cuts will be enough for investors who have been clamoring for more operational cost cutting for years.

Intel Needs to Improve

Intel’s stock recently dipped despite no news, possibly influenced by Nvidia’s (NASDAQ:NVDA) robust earnings report. Nvidia’s 10-for-1 stock split and potential Dow inclusion overshadowed Intel’s position in the market.

Indeed, it’s becoming clear that Intel is no longer the chip giant big money investors want to own. Nvidia is wearing the crown, and companies like Intel are scratching it out for the less-lucrative parts of the market.

Nvidia’s update didn’t directly affect Intel, highlighting Intel’s struggle to gain ground in the AI GPU market with its Gaudi3 accelerator.

CEO Jensen Huang emphasized its competitive edge regarding total cost of ownership and cloud presence. Nvidia’s diversified ventures, including AI factories, contrast Intel’s market lag. With Nvidia’s stock split imminent, its potential replacement of Intel in the Dow seems increasingly plausible.

It’s my view that Intel is a company that’s got too many headwinds and competition to be worth owning at current levels. If the stock drops further, maybe the discussion will change. But for now, I’d have to rate INTC stock a sell.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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