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Why Intel Stock Plunged Today

By Joe Tenebruso – Jul 24, 2020 at 3:51PM

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The semiconductor giant is giving its competition a head start that could be difficult to overcome.

What happened

Shares of Intel (INTC 0.43%) plummeted on Friday, following the release of its second-quarter earnings report and conference call. As of 3:20 p.m. EDT, Intel's stock was down more than 16%.

So what

Intel's Q2 revenue climbed 20% year over year to $19.7 billion, driven by strong growth in its data-focused businesses. Its adjusted earnings per share, meanwhile, increased by 16% to $1.23. Both figures were above Wall Street's estimates. Analysts expected revenue and adjusted EPS of $18.5 billion and $1.11, respectively. 

A downwardly sloping stock chart.

Intel stock plunged on Friday. Image source: Getty Images.

However, Intel gave investors multiple causes for concern. At 53.3%, Intel's gross margin was down sharply from the 59.8% it reached in the prior-year period and the lowest it's been in more than a decade. Falling gross margins typically reflect higher costs and an inability to pass those costs on to customers.

Worse still, Intel said the launch of its new 7-nanometer chips would be delayed by roughly six months. Analysts say the delay will give rival Advanced Micro Devices (AMD -2.51%), which has already begun selling its 7-nanometer chips, a significant advantage. AMD's stock, in turn, rose sharply on the news. 

Now what

There were already concerns that AMD's new chips -- due to their significantly improved performance and advanced graphics capabilities -- would begin to take share from Intel. A 6-month delay will only add to Intel's troubles and likely accelerate AMD's market share gains. Should this scenario play out, more pain could lie ahead for Intel's shareholders.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.

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