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Why Intel Stock Was Sliding Today

Motley Fool - Mon Dec 4, 2023

Shares of Intel (NASDAQ: INTC) were heading lower Monday, seemingly in response to an article published by The Wall Street Journal late Friday that detailed some of the challenges the company is facing. Additionally, a broader sell-off in tech stocks was weighing on the chipmaker Monday as the Nasdaq Composite index pulled back in response to rising Treasury yields.

As of 1:35 p.m. ET, Intel was down by 3.4%.

A pair of tweezers holding a chip over a computer board.

Image source: Getty Images.

Intel is caught between a rock and a hard place

The Journal article detailed several of the challenges Intel faces. Among the most prominent is the declining market share of Windows computers in the personal computer market -- devices that are responsible for one of Intel's most important revenue streams. It's also losing out as customers such as Microsoft are making more use of chips from ARM that generally consume less power than Intel's. Meanwhile, Microsoft is also focused on deploying Windows in the cloud, where it won't need to run on Intel chips.

With the calendar about to turn to 2024, Intel is seeing increased competition from a range of competitors that have followed ARM's blueprint -- among them Alphabet, Amazon, Qualcomm, and Apple.

What it means for Intel

Intel has been struggling for years, losing market share to Advanced Micro Devices, Nvidia, and other more innovative competitors. Meanwhile, Intel continues to be heavily dependent on the PC channel, which also explains its underwhelming performance.

More than half of its revenue comes from its PC-focused client computing group, where sales have been falling for several quarters due to a cyclical downturn. While the stock has rebounded in recent months on signs that the cycle is turning, the risks discussed by the WSJ article are more than just cyclical headwinds.

Revenue and profits are still falling on a year-over-year basis at Intel. Investors should tread cautiously as a continued comeback in the chip stock will require solid top-line growth and growing profits.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Apple, Microsoft, Nvidia, and Qualcomm. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

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