Investors are facing concerning economic indicators, and new reports are making it harder to guess what Intel’s turnaround strategy will be.
Intel (INTC -2.63%) stock is sinking again in Friday’s trading. The chip company’s share price was down 2.1% as of 3:10 p.m. ET, according to data from S&P Global Market Intelligence.
Following disappointing August jobs numbers released the U.S. Labor Department today, the stock market is seeing an uptick in bearish sentiment — and Intel is part of the pullback. Recent reports about the company’s fabrication business and the possibility that it’s eyeing selling off other parts of its business are also weighing on the chipmaker’s valuation.
Are investors giving up on the Fed’s “soft landing?”
Today’s jobs report showed that the U.S. economy added 142,000 jobs in August. This performance missed the average Wall Street estimate of 160,000 new job additions, but the shortfall is actually even more significant than it appears on a surface level. Reacting to declines in U.S. manufacturing and other bearish indicators, analysts and economists had already begun guiding jobs estimates for last month downward.
The disappointing jobs numbers added to fears that the economy is on track for a recession. The Federal Reserve will likely cut interest rates at its meeting starting on Sept. 17, but investors are feeling increasingly uneasy about the overall macroeconomic backdrop. While the Fed has been trying to engineer a “soft landing” that sees inflation tamed and recession avoided, investors are now worried that economic contraction is on the horizon. A weakening macro outlook is weighing on stocks today, but that’s not the only bad news for Intel shareholders.
Uncertainty surrounds Intel’s outlook
With its Q2 report earlier this month, Intel sent signals that the company was in disarray. Quarterly margins and guidance came in significantly worse than expected, and the company announced that it was pursuing major cost-cutting and restructuring initiatives that would involve laying off 15% of its workforce and other big moves.
According to a report published by Bloomberg after the market closed yesterday, Intel is looking into selling part of its stake in Mobileye — its machine-vision-technology unit. The chipmaker is reportedly interested in selling as much of 88% of its equity position in Mobileye.
Reuters then reported this morning that Qualcomm was looking at buying part of Intel’s chip design business. Qualcomm is reportedly particularly interested in Intel’s client PC segment, but all of the design units are supposedly being looked at for potential acquisitions.
Meanwhile, other reports have suggested that Intel was looking into spinning off its chip fabrication business — and shareholders have had to contend with bad news on the fab front. According to a report from Tom’s Hardware, Intel will no longer be using its 20A process node for its consumer Arrow Lake processors. Instead, the company is expected to use a node from Taiwan Semiconductor Manufacturing. This news came on the heels of a report that Broadcom had evaluated using Intel’s 18A node but opted not to go through with it following unsatisfactory test results.
With today’s pullback, Intel stock went as low as $18.64 per share — its lowest price in the last 10 years. While shares could be tempting at current levels, there’s little visibility as to what path forward the company will take. Recent reports suggest the company itself may be unsure of what its strengths are in the highly competitive chip market.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Qualcomm and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.