Once the undisputed king of semiconductors, Intel (NASDAQ:INTC) has been courting one disaster after another. While the investment community has generally tolerated the missteps and the occasional scandals, Intel stock received a very rude awakening late last month. That was when the underlying company announced that the production of is next-generation chips will be delayed until 2022.
Following the terrible news, Intel stock cratered, dropping more than 16% of market value from the prior day’s session. According to management, the company identified a “defect” in the 7-nanometer manufacturing process, causing this devastating setback.
It’s hard to put into words how unsettling and costly this latest impediment truly is.
As you know, Intel’s closest rivals have already begun shipping out their 7-nanometer chips that are incorporated into various laptop computers. One of the biggest problems for Intel is that it has held tightly to running its own chip-making facilities or “fabs” using industry lingo. On the other hand, semiconductor rivals have advantaged outsourcing.
Now, INTC finds itself behind the eight-ball, giving its competitors years of uncontested market gains in the advanced chip race. Once the company gets its act together, the sector could look very different; hence, the volatility in Intel stock.
Another issue plaguing the semiconductor vanguard is that the chip delay isn’t the only major setback this year. A popular client and a pivotal partner to Intel announced its intentions to move away from INTC and design its own chips.
Perhaps in any other circumstance, Intel could pick itself back up. However, the culmination of sizable stumbling blocks suggests that the industry is losing confidence in Intel. Thus, it may be a long winter for the company. Thankfully, there are other tech plays that will be next generation leaders in significant technological developments.
Don’t Play the Contrarian Game With Intel Stock
From another angle, you may be tempted to take a shot with Intel stock. While the 7-nanometer chip delay was not what long-term stakeholders wanted, it’s not as if the INTC brand will evaporate. After all, the company still has a robust data center business. And it’s involved in cutting-edge technologies.
Although no one is advocating for shorting Intel stock, it’s clear that whatever recovery narrative INTC may enjoy will take significant time to materialize. At the very basic level, you must appreciate that the timeline in technology is exponential. Losing one year’s worth of innovation might as well translate to a decade.
Its this severity for which investors are simply saying, no mas! And really, who can blame them? Between 2006 through the end of 2017, Intel stock has moved closely in tandem with the benchmark Nasdaq 100 Technology Sector index. But from 2018 onward, the relationship between the two — though significantly correlated — lost much of its strength.
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Unfortunately, it’s not hard to see why. The 7-nanometer delay last month is just the latest in a series of troubling delays and disappointments. For instance, in August 2018, Intel announced a delay to its 10-nanometer chip production. A month later, it announced delays in 14-nanometer chip production.
Later, in November 2019, Intel publicly apologized for its myriad manufacturing issues and supply chain backlogs. Clearly, management’s insistence of doing everything in-house — typically, semiconductors either design chips or manufacture them, not both — was just not panning out.
With the 7-nanometer bomb, INTC received the message loud and clear. Now, the leadership team is looking for a contingency plan.
Though I like the never-give-up attitude, an earlier recognition of changes within the semiconductor industry would have done them much better. But there are still some lesser-known companies that are bound for long-term technological dominance.
Better Bets With Your Money
Curiously, earlier this month, Intel stock enjoyed a nice pop higher after management declared an “accelerated share purchase program to buy back $10 billion” of INTC shares.
According to a company statement, Intel “believes that its common stock is at the time of this announcement trading well below intrinsic valuation.” On the surface, it seems like a plausible argument, with INTC correcting to a long-term support line.
However, part of the intrinsic valuation of Intel stock rested on the belief that the chipmaker will start making good on its promises. Instead of making amends, though, it keeps breaking new promises. Sadly, because of its infrastructure, it will take many years to start righting the ship.
Frankly, I don’t see this as a good use of your money, especially with so many compelling opportunities available. INTC may not be a sell, but it’s certainly a pass.
But, with that said, I want to quickly bring your attention to a growth play that’s actually worth considering today.
While tech titans like Apple (NASDAQ:AAPL) and Samsung helped lay the foundation for our hyper-connected society, this company stands to lead a technological revolution that will forever change communication on a global scale.
As InvestorPlace’s chief technology analyst, I’ve worked feverishly with our veteran research team to identify the best stocks to buy. Over the years, InvestorPlace’s research has helped millions get ahead of the curve. Our subscribers have enjoyed massive gains in tech titans like Apple (19,954% gain) and Intel (12,547% gain) … just to name a few.
Now, I’m ready to share with you the stock behind the next big development in communication. The company has already inked deals with mobile phone titans Apple, Samsung and LG. But it’s bound to become its own king with an approach to mobile interaction that we’ve never seen before.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.
