Intel (INTC 6.79%) stock delivered decent returns from 2010 through 2020, but over the last five years, its shares have been a lousy investment. The stock started to rebound in 2023 before plunging 54% in 2024. The share price is trading at the lowest level since 2013.
Anytime a blue chip stock like Intel, a member of the Dow Jones Industrial Average, falls to multiyear lows, it can be easy to declare the stock "cheap" and buy it hoping for a big rebound. After all, Intel is the dominant supplier of central processing units (CPUs) for consumer PCs, and it has vast resources with $54 billion in trailing-12-month revenue.
However, Intel is only cheap in price; it's not cheap based on its financial results and growth. In fact, based on market share losses and Wall Street's earnings estimates for 2025, I believe the stock is fairly valued and will probably continue to disappoint investors.
NASDAQ: INTC
Key Data Points
Intel is losing ground to its top CPU rival
The market for data center and server chips is exploding as companies upgrade to handle artificial intelligence (AI) workloads. Statista projects the AI server market to grow tenfold to $430 billion by 2033.
Given this huge opportunity, investors should expect to see Intel growing faster than it is right now. Intel's data center and AI revenue grew just 9% year over year in Q3. This compares to competitor Advanced Micro Devices, which reported a 122% year-over-year increase in its data center segment, driven partly by AMD Epyc CPU sales. AMD believes it gained market share in Q3 in the server CPU market, and its relative growth to Intel backs that up.
AMD is also beating Intel in the PC market. Intel said revenue from its client computing group fell 7% over the year-ago quarter. Meanwhile, AMD's client segment posted an increase of 29% year over year, driven by strong demand for Zen 5 Ryzen processors.
To be fair, Intel is still the leader in CPUs. Its share of the x86 CPU market was 62% in Q3, according to Statista. Intel's products are more widely distributed across the PC market, which gives it an advantage. But it doesn't appear Intel will stop losing share to AMD anytime soon. AMD's Ryzen and Epyc server CPUs rank at the top of Passmark Software's benchmarks on performance, which is not what Intel needs if it is going to regain the throne of industry-leading chip performance.
The stock is not as cheap as it looks
The investment case doesn't hold up when investors look at Wall Street's earnings estimates and compare that to Intel's valuation. Analysts expect Intel to strengthen its profitability next year, as it launches new products, and report earnings per share of $1 in 2025. But the stock still trades at a price-to-earnings ratio of about 23 on those estimates, which is slightly higher than the S&P 500 average.
Even if investors consider long-term growth, analysts only expect Intel to grow earnings at an annualized rate of 5% going forward. That's in line with previous estimates prior to the stock's fall.
Intel could have an opportunity to beat Wall Street's expectations as more AI-enabled PCs become available. Intel has new Core Ultra processors and the upcoming Panther Lake chips that are designed to take advantage of AI PCs and could position it for a comeback in the consumer market.
Still, AMD is also innovating with a pipeline of new chips to take advantage of the same opportunities. At this point, given the ongoing share losses, investors should wait before pulling the trigger on Intel stock. Until the company starts to stabilize its market share losses with new products, Intel won't provide enough growth to provide satisfactory returns to shareholders even at these lower share prices.
