Shares fall significantly
Chip boom continues to bypass Intel
April 26, 2024, 4:54 p.m
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Intel was once the benchmark among chip manufacturers. The competition has long since overtaken the US manufacturer. Intel is once again delivering weak numbers and is still stuck in the loss zone. In addition, the company’s plans can hardly inspire imagination – the share price is on the decline.
The current lack of competitive special processors for artificial intelligence (AI) is slowing Intel’s growth. In addition, the business with contract manufacturing of computer chips, in which the group has high hopes, is not getting off the ground. Therefore, Intel presented an outlook below market expectations, which sent the stock plummeting. The paper has now lost more than a quarter of its value since the beginning of the year. In Xetra trading, the share fell below 30 euros in the afternoon and is now a long way from its annual high of more than 46 euros.
Due to sluggish demand for classic processors for PCs and data centers, Intel forecast sales of $12.5 billion to $13.5 billion and earnings of $0.10 per share for the current quarter. Analysts had hoped for just under $13.6 billion or $0.25 per share. First quarter revenues also fell short of forecasts at just over $12.7 billion. The order business even shrank by ten percent. The bottom line was a loss of $400 million.
A few weeks ago, the once world’s largest chip manufacturer presented the special AI chip developed together with the Alphabet subsidiary Google. In doing so, the two companies want to steal market share from the world market leader Nvidia. According to experts, this currently dominates around 80 percent of the market. Intel boss Patrick Gelsinger expects “Gaudi 3” to generate sales of more than $500 million this year. The chip will be delivered to computer manufacturers such as Dell, Hewlett-Packard and Lenovo. Intel recently emphasized that it was hearing from tech companies that they wanted to see more offerings in the market beyond Nvidia.
USA is pumping billions into the chip market
Chip stocks are actually the stocks of the moment. Nvidia, the benchmark, has gained more than 70 percent since the beginning of the year. The industry is currently being overwhelmed with state aid. Chips are needed to power everything from smartphones to fighter jets. They are also becoming increasingly important for the automotive industry and especially for electric vehicles. The global chip industry is dominated by a few companies, including TSMC in Taiwan and Nvidia, based in California. The topic of artificial intelligence, which requires special semiconductors, recently caused new price fantasies. The manufacturer TSMC recently spoke of “insatiable demand”.
The USA is highly dependent on Asia, especially for the production of semiconductors. US President Joe Biden wants to counteract this with the so-called Chips and Science Act: The law provides support worth $52.7 billion for companies that relocate production to the USA.
The US government recently announced another billion-dollar subsidy for a semiconductor manufacturer. The US company Micron will receive up to $6.1 billion for two new plants, the White House said on Thursday. The Department of Commerce could also make up to $7.5 billion available to the company in the form of loans. Micron plans to invest $50 billion in the United States by 2030, the White House said. In the following 20 years, another $125 billion could be added. The new manufacturing facilities are expected to immediately create 70,000 jobs. Micron shares have increased by a good third since the start of the year.
The South Korean manufacturer Samsung has already received a commitment of $6.4 billion for a new factory in Texas. TSMC wants to build a third plant in Arizona and will receive $6.6 billion from Washington. In Germany, Intel will receive ten billion euros for a new factory in Magdeburg. The subsidies still have to be approved by the EU Commission. Infineon has received aid for its plant in Dresden.