Intel (INTC) shares were a significant disappointment in 2024, following the unexpected retirement of CEO Pat Gelsinger and the appointment of interim co-CEOs without a clear strategy. Investors remain skeptical about the company’s potential for a turnaround.
Risks linked to Intel 18A manufacturing process
Intel 18A is the fifth and final process node in Intel’s five-nodes-in-four-years manufacturing plan. Progress has been made in catching up with Taiwan Semiconductor Manufacturing in terms of manufacturing technology, and Intel 18A is intended to restore competitiveness, featuring a new transistor design and the first process to utilize backside power delivery, which can enhance performance and efficiency. However, the pace of securing major customer commitments for Intel 18A has been slow, raising concerns as the company requires additional wins to justify the substantial investments for volume production.
Multiple upcoming product lines, including Clearwater Forest and Panther Lake, are set to use Intel 18A for manufacturing. Any delays or issues with this critical process could hinder both the foundry business and the launch of necessary products, jeopardizing the overall comeback for Intel.
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Challenges in the PC and AI markets
In the desktop CPU market, Intel is facing significant hurdles. The previous generation Raptor Lake chips exhibited stability issues leading to extended warranties. Meanwhile, the newly released Arrow Lake chips do not perform as well as Raptor Lake or competing AMD CPUs in gaming. Despite several software fixes aimed at improving Arrow Lake’s performance, it remains less appealing for gamers, with findings from Tom’s Hardware suggesting that these fixes inadvertently improved the performance of older Intel chips instead.
Intel is also falling behind in artificial intelligence (AI), despite the Gaudi line of AI accelerators presenting a favorable value proposition on paper. Adoption is hindered by immature software, resulting in missed sales targets, as the company aimed to sell $500 million worth of AI accelerators in 2024 but failed to meet that goal. Additionally, Intel plans to integrate Gaudi with its data center GPUs into a new product line, which is unlikely to significantly boost its AI business in 2025, particularly as AMD has been performing better in this segment.
The absence of a strong AI accelerator business could further pressure Intel’s stock as investors explore other opportunities in the burgeoning AI market.
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Featured image credit: Intel
