Intel’s (NASDAQ:INTC) May 13 annual shareholder’s meeting will be the first under new CEO Pat Gelsinger. The company — and investors — have high hopes for Gelsinger, who has a 30-year history with Intel. INTC stock is down 7.68% since he took the reins of the company on Feb. 15.
He first joined the company when he was 18, working under founders Robert Noyce and Gordon Moore, eventually becoming Intel’s first CTO. With the company struggling and INTC stock down even more over the past month, shareholders will be listening closely to what Gelsinger has to say.
Intel faces a wide range of challenges and opportunities. Here are three of the critical storylines that INTC stock investors need to be watching for on Thursday.
Will Intel Chips Regain Former Glory?
For shareholders and the public, the story of Intel over the last five years has been the company’s dramatic stumble in computer processors — the company’s core product. Intel has traditionally dominated the market for PC processors. As 2016 wound down, the company produced 82.5% of all computer processors sold. Rival Advanced Micro Devices (NASDAQ:AMD) was a distant second and its processors were primarily used in cheap PCs.
However, 2016 also marked a turning point. AMD released its new Ryzen processors that year. As Intel began to struggle with maintaining a regular product release roadmap, AMD executed and began to relentlessly eat into Intel’s customer base. In 2020, AMD was already selling high-performance chips based on an advanced 7 nanometer (nm) process. Intel, meanwhile, was struggling to produce a consistent supply of 10nm chips.
Last July, after announcing its own 7nm chips would be delayed until 2022, Intel’s chief engineering officer left the company. Intel’s then-CEO openly pondered the possibility of turning to other semiconductor manufacturers to make the company’s chips. The next day, INTC stock dropped 16% while AMD shares popped by close to 17%.
At this point, Intel computer processors have a 60.6% market share. AMD has continued making gains, including eating into the laptop and server markets, and now has 39.4% of the market. Premium laptops are advertising AMD processors instead of Intel chips as a major selling point.
Shareholders need to know what Intel’s plans are to wrestle the momentum away from AMD, and begin winning back the PC processor market.
Apple’s M1 Processors Pose Real Threat
If you own INTC stock, you’re worried about Apple (NASDAQ:AAPL). Last November, the company announced Macs would transition from Intel processors to Apple’s own, custom M1 chips. The move will result in a small loss of revenue for Intel once complete — Apple accounts for an estimated 2% to 3% of Intel’s revenue. That’s small enough that INTC stock would shrug it off.
The really bad news is that Apple’s chips are good. They are holding their own against, or outperforming high-end Intel chips. And the M1 is Apple’s first whack at it. You can bet new versions will be tweaked to be measurably more powerful. This isn’t the first crack in the Intel (and AMD) computer processor hegemony. In 2019, Microsoft (NASDAQ:MSFT) put Intel on notice by releasing the new Surface Pro X. The 2-in-1 Windows 10 tablet was powered by a custom Qualcomm (NASDAQ:QCOM) processor. And yes, that announcement pushed INTC stock down.
The big danger is that if these custom processors catch on, other PC manufacturers will follow suit. Shareholders need to know what Intel’s strategy is to prevent custom PC processors from eventually gutting its core business.
The answer is likely tied up with the first question. Apple was known to be frustrated with Intel’s processor roadmap. The company ultimately decided that developing its own chips was the path to avoiding the shortages and delays that plague Intel.
Seeking Status as Global Contract Chip Powerhouse
The world is in the midst of an unprecedented shortage of semiconductors. The lack of chips is hitting PC availability, but also impacting a huge range of products ranging from TVs to cars. Chipmakers can’t keep up with the demand.
Unlike many tech companies, Intel operates its own foundries. It is an actual chip producer. So why not take advantage of this know-how to tap into the demand? The global chipmaking industry is valued at $400 billion, making it a very lucrative target. In March, Intel announced a plan to spend $20 billion expanding its foundries. It would then enter into the custom chip business, manufacturing semiconductors for other companies.
Below is the page describing the new IDM 2.0 strategy from last month’s 2021 Spring Stockholder Outreach presentation:
If Intel is actually able to pivot from being so bad at it that it was looking at contracting out the job for its own chips, to building more capacity and taking on fabrication for other companies, that would be a big win for INTC stock. However, that is a huge leap to be making in the space of just two years. Shareholders need to hear more about this plan — the expenditures, the timeline, and whether any potential customers have been identified.
Thursday, May 13 is the big day. Expect Intel’s new CEO to address these big storylines and more. And keep an eye on INTC stock on Friday. Odds are we’re going to see some movement, one way or another.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.