Intel in Focus: Investors Skeptical Despite Progress in Artificial Intelligence

In the age of Artificial Intelligence (AI), the technology sector is undergoing significant transformations. Particularly, Intel, a prominent player in this market, continues to evoke mixed feelings among investors. For many shareholders, the ultimate returns from the extensive investments in AI infrastructure and chips remain crucial. Dan Niles, founder and portfolio manager of Niles Investment Management, recently emphasized in a CNBC interview that the decline of the so-called Mag. 7 stocks after the second-quarter results reflects a “fundamental shift” in the industry. Companies that recorded substantial profits during the COVID-19 pandemic are now in a “digestive phase.” Niles expects similar developments in the coming year. At the market level, Niles points out that the broader market is on the rise compared to the Mag. 7 stocks when considered on an equal-weight basis. He advises investors to acquire stocks that could benefit from interest rate cuts—among them consumer goods, utilities, and telecommunications services. In his view, the remaining 493 companies could drive the market to new “record highs.” Intel, which recently ranked seventh on Insider Monkey’s list of the best AI stocks, was scrutinized more closely. The company's shares registered gains following reports that strategic options to turn the company around were being evaluated. However, Ed Snyder of Charter Equity Research expressed concerns about the current management under CEO Pat Gelsinger, which continues to follow the old corporate strategy. The weak second-quarter results and disappointing forecasts added to the losses of Intel shares. The company predicts a decline in the gross margin to 34.5% for the third quarter, a significant drop from the forecasted 43.5%. Additionally, Intel is grappling with issues such as high inventory levels and substantial long-term debt of nearly 52 billion dollars. Analysts and institutions like S&P Global remain skeptical and have placed Intel’s creditworthiness under review. As Intel's challenges appear to persist until 2025, experts advise focusing on other AI stocks that promise more immediate returns, especially when these are traded at favorable valuations.