With soaring stock prices and an influx of funds, Intel faces a high performance threshold test

According to the Zhitong Finance APP, previously, a wave of investments from the White House, Nvidia (NVDA.US), and Softbank Group Corp. has driven Intel (INTC.US) stock price to soar 86% in less than three months. The chip manufacturer is set to disclose its third-quarter financial report after the market closes on Thursday. Investors will focus not only on the net profit data but also on the deeper insights revealed in this earnings report.

The rapid increase in stock price has led several analysts to downgrade their ratings in recent weeks. Bank of America downgraded Intel's rating from "Neutral" to "Underperform" in a report to clients last week, expressing concerns that the stock has "risen too fast and too high." The surge in market enthusiasm has also inflated Intel's stock price valuation—its forward 12-month dynamic price-to-earnings ratio has reached 63 times, far exceeding the approximately 20 times in January, placing it among the 15 companies with the highest valuations in the S&P 500 index.

This increase is particularly striking because, about a year ago, Intel was removed from the Dow Jones Industrial Average—having been part of the index since 1999—replaced by its competitor, the popular artificial intelligence company Nvidia.

On Wednesday, the Trump administration indicated it is considering export restrictions to China targeting the technology sector, which put pressure on Intel's stock price, closing down 3.2% at $36.92. However, this price is still well above the market consensus 12-month target price of $28.80. The Philadelphia Semiconductor Index fell 2.4% that day, with all but one component stock closing down.

Joe Tigay, portfolio manager at Gabelli Funds, stated that Wall Street generally believes that Intel's latest earnings report, scheduled for release after the market closes on Thursday, may be disappointing. In the funds managed by Tigay, the "Catalyst Nasdaq 100 Hedge Fund" holds Intel shares, while the "Rational Equity Defensive Fund" has completely exited its Intel position.

"The key now is more about the future," Tigay added, "Investors are not focused on last quarter's performance but want to know how this chip manufacturer will address 'current economic issues to achieve future goals.'"

Regarding the latest financial report data, Wall Street will focus on the effectiveness of Intel's cost-cutting measures. Tigay expressed hope to hear management explain "how they will achieve profitability, which products will drive growth, and performance expectations for these businesses next year."

Market expectations are for Intel's adjusted earnings per share in the third quarter to be 1 cent, with revenue around $13.2 billion; in the same period last year, the company reported a loss of 46 cents per share and revenue of $13.3 billion. In September of this year, after selling the majority stake in Altera to Silver Lake, Intel lowered its expense targets for 2025.

Investors are also looking for clues to determine whether the nearly $18 billion investment the company received this summer has begun to yield returns. Cantor analyst C.J. Muse wrote in a report to clients on October 18 that, in fact, Intel's stock price is benefiting from "market expectations for further positive announcements to follow." In addition, Intel's CEO Lip-Bu Tan is also in the spotlight. Tan took office in March this year and told investors during his first earnings call that it would take time for the company to turn a profit. However, just a few months later, investors have begun to lose patience. Stifel analyst Ruben Roy pointed out in a report on October 21 that Intel is currently facing a situation where "the CEO is still relatively new, the corporate culture is being reshaped, and the investors' doubts are not new."

A core question of concern on Wall Street is whether Tan plans to reduce the losses in Intel's foundry business.

Dan Morgan, senior portfolio manager at Synovus Trust, which holds Intel shares, stated, "Without government support or other financially stronger chip partners, Intel's foundry division will struggle to raise enough funds to continue expanding more fabs at a reasonable pace."

Overall, the message conveyed by investors and analysts is that the core of investing in Intel lies not in past performance, but in future possibilities. Earnings reports are essentially retrospective, so their results may not impact the company's stock price; however, any statements regarding future plans are likely to affect the stock price.

"I think most investors won't pay too much attention to the earnings data," said Ryuta Makino, a research analyst at Gabelli Funds. As of September 30, the fund managed assets totaling $35 billion. "I believe that, at least in the short term, Intel is a trading stock, more driven by events."