The American multinational corporation and technology company Intel Corporation has made a name both in the general computer industry and the more specific market for personal computers. It is one of the leading semiconductor manufacturers in the world that has powered both personal and enterprise computers and workstations. The company can also be attributed as one of the main contributors to the personal computer revolution that began in the 1990s due to its development and production of microprocessors that have made personal computing both accessible and relevant to the mass market. Nevertheless, with decades of experience and a strong brand name, it would be logical for most investors to invest in Intel stock and include it as part of their stock and specific tech portfolios. However, considering the current competitive landscape and the status of the company, there are also pointers and reminders that need to be considered.
Should You Invest in Intel Stock? A Look at the Pros and Cons
Pros: Advantages of Intel Stock
Intel has an established business-to-business and business-to-consumer models. It supplies chips for manufacturers of computer systems. Some of its chips are also available to retail consumers as off-the-shelf computer hardware. The company has also catered to specific enterprise clients that need microprocessors and other semiconductors to run their workstations and databases.
The company is also considered one of the largest manufacturers of processors in the world in terms of revenues. It has also been included in the Fortune 500 list of the largest corporations and largest tech companies in the United States. The company has also achieved success in marketing its line of central processing units for the personal computer market.
Furthermore, apart from its PC chip products, Intel also manufactures chipsets, network interface controllers, field-programmable arrays, and flash memory. These products are marketed toward other manufacturers like computer systems manufacturers. The established business-to-business model of the company has diversified and expanded its sources of revenues.
It has re-entered the specific graphics processor market to compete with Nvidia and AMD. The company has also invested heavily in developing hardware for artificial intelligence acceleration and applications to benefit from the ongoing artificial intelligence revolution and respond to demands. Below are the specific advantages of investing in Intel stock:
• Leadership in the PC CPU Market: Intel is one of the largest manufacturers of chips in the world and it has retained a dominant position in the specific market segment for CPUs in the more general PC market. Investing in this company means investing in the future of personal computing and future advances in processors.
• Clear Artificial Intelligence Strategy: The company also aims to capitalize on the future of artificial intelligence. It has developed AI accelerators for PC users and has also been developing specific processors for training and running artificial intelligence models. An Intel stock is a great addition to a portfolio of AI stocks.
• Diversified Portfolio of Products: Another possible advantage of Intel stock is the diverse product portfolio of the company. It designs graphics processors for end users and other processors for enterprise users. The company also produces semiconductors used in other electronic devices and offers a range of technological solutions.
• Dividend-Paying Large-Cap Stock: Intel is both a tech stock and a large-cap stock. It also has a strong history of regularly releasing dividends at a decent annual dividend yield of around 2 percent. Investing in this company means investing in a large-cap tech stock. It is also a good addition to an income-generating portfolio.
• Relatively Affordable Stock Price: The company also trades at a lower price. Data from 2019 to 2024 show that its stock price has been below $60.00 on average. It is still a growth stock. AMD has traded around $100.00 while Nvidia has climbed from $150.00 in December 2022 to more than $700.00 in February 2024.
Cons: Disadvantages of Intel Stock
Intel might be a dominant player in the specific CPU market for personal computers and also has a strong reputation for providing chips for the enterprise market segment. However, considering the fact that smartphones and tablet devices have dampened the appeal of personal computers, in addition to strong competition against AMD, this has affected its revenues.
The company had attempted to enter the mobile chip market and provide processors for mobile devices like smartphones and tablets. This was a futile pursuit. The company never achieved success in this segment due to the dominance of companies like Qualcomm and MediaTek which have become the main suppliers of chips for Android mobile devices.
Outsourcing to pure-play semiconductor companies like TSMC has been one of the biggest obstacles to Intel. Take note that Qualcomm and MediaTek, as well as Nvidia and Apple, have outsourced chip manufacturing to TSMC. The company also has a history of lagging when it comes to developing and utilizing newer manufacturing processes and technologies.
It also has struggled to market its graphics processors both to the PC gaming segment and AI companies that use GPUs to train and run AI models. Nvidia remains the dominant supplier of graphics processors in the world. AMD also has a reputable market share in the graphics processor market. Below are the specific disadvantages of investing in Intel stock:
• Dependence on the PC Market: It is true that Intel is a leader in the PC CPU market segment but most of its revenues are dependent on the sales of its Intel Core and Intel Xeon processors. This can be a disadvantage because investing in Intel stock also means betting on the future sales and market appeal of personal computers.
• Historical Failed Market Ventures: The company also has a record of entering a market and failing. It had an unsuccessful bid to enter the mobile chip market. The graphics processor from Intel has also failed to compete against Nvidia and AMD. Note that Nvidia dominates the market for GPUs and AI accelerators.
• Tough Position Due to Competition: Another disadvantage of Intel stock is that its growth depends on its capabilities to compete and innovate. It has been struggling to compete against Nvidia in the GPU market and faces tough competition from Apple in the PC market segment and Samsung in the memory market.
• Possible Industry Growth Slowdown: The growth of the semiconductor industry is at risk of slowing down due to manufacturers reaching the physical limitations of chip design and chip fabrication. Intel has struggled to utilize more recent manufacturing technologies and its growth rests on the direction of the industry.
• Exposure to Industry Disruptions: It is also worth noting that the CPU market and the entire PC market have been disrupted by the arrival of smartphones. The same markets are also exposed to potential industry-wide disruptions due to upcoming technologies like spatial computing and quantum computing.