Why Intel Stock Is Falling Today
Intel's stock fell 2.6% amid criticism from TSMC's founder Morris Chang regarding its strategy in chip fabrication. Chang suggested Intel should focus on AI chip design rather than competing in third-party manufacturing. With the recent departure of CEO Pat Gelsinger, Intel faces challenges from rivals like AMD and Arm. The company must decide on its future strategy, which could involve restructuring its design and foundry operations. Despite current struggles, a rebound in stock may occur once a clear strategy is established.
Intel (INTC -2.79%) stock is losing ground in Tuesday's trading. The semiconductor company's share price was down 2.6% as of 1:45 p.m. ET, and had been down as much as 3.2% earlier in the daily session.
Intel stock is falling today after Taiwan Semiconductor Manufacturing founder Morris Chang made comments criticizing the U.S.-based company's strategy and execution in the chip fabrication space. TSMC is the clear leader in the contract semiconductor manufacturing market, and Intel has been spending billions trying to match its rival's production capabilities.
TSMC's founder thinks Intel's fabrication bet was a mistake
Following the recent departure of former CEO Pat Gelsinger, Chang criticized Intel's push into the chip foundry space yesterday. Chang indicated that Intel should have focused on improving its position in designing artificial intelligence (AI) chips, rather than trying to become a major player in third-party chip fabrication services.
Intel occupies a unique position in the semiconductor market because it has substantial fabrication capabilities in addition to its design business, and the company manufactures many of its own chips. Meanwhile, most other chip designers opt to have their chips manufactured by a third party -- and no company comes close to matching TSMC's position in the fab space. Intel has been investing to improve and expand its fabrication business, but big wins in the category have proved elusive thus far.
What's next for Intel?
Speaking on Intel's current situation, TSMC's Chang said, "They currently have neither a new strategy nor a new CEO. Finding both is very difficult." While Chang's assessment of his competitor's situation may seem stark, it highlights some of the challenges facing Intel right now.
The company has been facing pressures from rivals including Advanced Micro Devices and Arm in the central processing unit (CPU) design market, and its foundry initiatives have been heavy on costs and light on results. Bringing on a new CEO, and deciding what the company's strategy will be, are important first steps in a new turnaround push, and Intel will have to determine whether it will move forward with a modified version of its current approach or make a radical departure.
Deciding whether to keep its design and foundry businesses under the same corporate roof appears to be the key strategic issue facing the company right now, and other units could be sold off as well. But while Intel is facing a tough path forward, it's possible that the stock could see a significant rebound once uncertainty is resolved and the new strategy becomes clear.
On the heels of today's sell-offs, Intel stock is now down 60% in 2024.