They say the U.S. is backing Intel—should I buy it now?

 

Is Intel’s stock price at its bottom right now?

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Table of Contents

1. Reasons Why the U.S. Is Supporting Intel

2. The Strategic Importance of Intel

3. Intel’s Stock Price and Market Reaction

4. Technical Analysis of Stock Price Trends

5. Summary and Conclusion

 
 

Recently, there’s been talk that the U.S. is strongly backing Intel.

This comes after the U.S. government decided to provide Intel with $19.5 billion (approximately 26 trillion Korean won) in semiconductor subsidies and loan support.

This support is part of the measures under the CHIPS and Science Act, enacted in 2022, making Intel one of the primary beneficiaries.

 
 

Reasons Why the U.S. Is Supporting Intel

 

The United States boasts the world’s most advanced semiconductor design technology, but its manufacturing market share falls short of 10% globally.

In particular, the U.S. has been lagging in the production of cutting-edge semiconductors.

 

To address this, the U.S. government has set a goal of increasing its share of advanced semiconductor production to 20% by 2030.

Intel is expected to play a pivotal role in achieving this ambitious target.

 
 

The Strategic Importance of Intel

 

Semiconductors hold a critical position in both national security and industry.

This is because they are indispensable in areas directly tied to national security, such as military systems, communications, and infrastructure.

 

However, the U.S. currently relies heavily on overseas supply chains, which poses a significant risk. In emergencies such as war, a lack of domestic semiconductor manufacturing capabilities could have serious implications for national security.

 

Intel stands out as the only company in the U.S. capable of producing advanced logic chips and AI chips domestically. This makes it an irreplaceable asset in ensuring a secure and self-reliant semiconductor supply chain within the country.

 
 

Intel’s Stock Price and Market Reaction

 

In March 2024, the U.S. government officially announced large-scale support for Intel. Ironically, however, Intel’s stock price continued to decline, falling nearly 70% from its peak in 2021.

 

This decline can be attributed to several factors:

1. Weaker-than-Expected Q2 2024 Earnings

Intel’s second-quarter performance fell short of market expectations, disappointing investors.

 

2. Decline in Earnings Per Share (EPS)

A drop in EPS signaled weaker profitability, further undermining confidence in the company’s near-term financial health.

 

3. Revenue Decline

Intel reported shrinking revenues, reflecting challenges in maintaining its market position and sales growth.

 

4. Employee Layoffs

Workforce restructuring and layoffs, while aimed at reducing costs, sent negative signals about the company’s current struggles.

 

5. Losses in the Foundry Business

Intel’s foundry division, which is key to its turnaround strategy, has been running at a loss, raising doubts about its ability to compete with established players like TSMC and Samsung.

 

Additionally, while the government’s financial support was significant, its long-term nature made it less effective at addressing the company’s immediate financial and operational challenges. Investors likely viewed this as insufficient to offset the short-term headwinds Intel was facing.

 

Intel Stock Price Trend: Decline from Peak

 

However, Intel’s Stock Shows Signs of Recovery

 

Recently, Intel’s stock has shown early signs of a potential rebound. This shift in sentiment can be attributed to several factors:

 

1. Restructuring Measures Spark Investor Optimism

Intel’s efforts to streamline its operations, including workforce restructuring and other cost-cutting measures, have renewed hope among investors that the company is taking concrete steps to improve its financial health and operational efficiency.

 

2. Increased Buying Interest in Undervalued Stock

With Intel’s stock heavily discounted, value investors are stepping in, recognizing potential opportunities. The influx of buying interest is helping to stabilize and lift the stock price.

 

3. Stock Trading Below Net Asset Value

Intel’s price-to-book (P/B) ratio currently sits at 0.73x, indicating that its stock is trading below the company’s net asset value. Such a low valuation suggests that the market may have overreacted to Intel’s challenges, and there is room for recovery if the company demonstrates steady progress in its turnaround efforts.

 
 

Technical Analysis of Intel’s Stock Price Trends

 

인텔 주가 흐름 : 엘리엇 파동, 피보나치 되돌림

 
1. Elliott Wave Analysis
1st Wave (Uptrend): The uptrend started from the 2009 low point of 13.29 and continued until the 2012 high point of 29.99.

2nd Wave (Correction): From the 2012 high point, there was a correction down to the 2013 low point of 19.23.

3rd Wave (Uptrend): There was a strong rise from the 2013 low to the 2021 high of 68.49.

4th Wave (Correction): A significant correction occurred from the 2021 high to the 2023 low, approximately 23.0. It retraced about 61.8% of the 3rd wave, exceeding the typical decline range for a 4th wave.

5th Wave (Future Prediction): If the 4th wave is complete, the 5th wave might begin. Typically, the 5th wave tests or slightly surpasses the 3rd wave's peak. However, the length of the 5th wave can be similar to or shorter than the 1st wave. To confirm the start of the 5th wave, a strong rebound from the current low is necessary. Currently, trading volume has increased, but a significant resistance level has not been clearly breached.
 

2. Fibonacci Retracement Analysis  
In typical retracement ratios, 78.6% serves as a major support level, which indicates a price level with a high possibility of rebounding or continuation. Currently, the price has broken below the 78.6% support level, making it act as a resistance level. If the 78.6% level collapses, a prolonged downtrend may continue, and there is a possibility of a decline to even lower levels. If the decline persists, the next support level could be the Fibonacci retracement of 100% at 13.29. However, if the price recovers above the 78.6% resistance level, it may find support and rise again.
 
 

Conclusion Summary

 
Intel, supported by the U.S. government, is expected to play a significant role in the U.S. semiconductor industry in the long term. Although Intel's stock price has declined due to short-term negative factors, there are many positives from a long-term perspective. It is important to observe how U.S. strategic support and Intel's restructuring efforts will play out. Just as the saying "Don't fight the FED" implies, the determination of the U.S. government cannot be underestimated.