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It’s funny how the financial market can flip so quickly. During the past several years, many investors disliked Intel (NASDAQ:INTC) stock because the company lost market share to its chip-making rivals.
Now, suddenly, some folks are ultra-bullish about INTC stock. Yet, there are reasons to maintain a healthy sense of skepticism about Intel.
Intel stock doesn’t deserve a full-scale “F” grade. However, it does get a “D” grade because the company’s financials don’t seem to justify CEO Pat Gelsinger’s high optimism.
At the end of the day, you’ll definitely want to get all of the relevant facts about Intel before considering a potentially ill-timed share position.
INTC Stock Jumps, but the News Isn’t All Good
Gelsinger was quite confident after Intel released its most recent round of quarterly earnings results. He seemed to suggest that Intel is at a “turning point” and declared, “It’s nice bouncing off the bottom.”
Should Gelsinger set himself up as Intel’s savior, though? Calling a “bottom” may be premature. Even though Intel posted a profit in 2023’s second quarter, there are some less encouraging facts that the bulls shouldn’t ignore.
First, Intel’s revenue declined 15% year over year. The company’s gross margin and operating margin declined, while Intel’s GAAP-measured tax rate ballooned to 280.5%.
In addition, INTC stock probably jumped post-earnings because the company benefited from rock-bottom expectations.
After all, in the wake of the company’s poor first-quarter performance and massive dividend cut, Intel seemingly had nowhere to go but up.
Intel’s CEO Acknowledges a Big Problem
Intel basically had no choice except to jump on the artificial intelligence chip bandwagon this year. Otherwise, other companies would quickly crowd Intel out of this lucrative tech-market niche.
Or maybe, it’s too late as Intel has already been crowded out by AI chip leaders, and especially Nvidia (NASDAQ:NVDA).
Gelsinger might claim that Intel is “well-positioned to capitalize on the significant growth across the AI continuum.”
However, he practically had to acknowledge Nvidia’s dominance and Intel’s weakness in this market.
Look closely at Intel’s quarterly results. What you’ll find is that the company’s Data Center and AI revenue declined 15% year over year.
Gelsinger made a striking admission during Intel’s second-quarter earnings conference call. He stated, “We do think that the next quarter, at least, will show some softness [for the data center business].”
Indeed, Nvidia is so dominant that Gelsinger almost admitted that Nvidia will divert AI and data-center revenue away from Intel:
“We do see that big cloud customers, in particular, have put a lot of energy into building out their high-end AI training environments. And that is putting more of their budgets focused or prioritized into the AI portion of their build out,” he said.
Intel Stock Isn’t Your Best Post-Earnings Pick
Gelsinger can’t just come out and say that Nvidia will continue to eat Intel’s lunch. Yet, cautious investors can come to this conclusion on their own.
In addition, financial traders should look at all of Intel’s quarterly stats – not just the positive ones – before they form any conclusions. Finally, Intel stock gets a “D” grade and isn’t a high-confidence chip-market pick now.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.