One former tech leader is on a downward spiral today and there doesn’t seem to be an end in sight. Intel (NASDAQ:INTC) has been volatile for weeks with little in the way of positive updates. But today, shares are taking a steep dive on news that the company is suspending its dividend.
For all its efforts to gain a share of the artificial intelligence (AI) market, Intel has mostly struggled over the past year. Indeed, INTC stock has fallen more than 50% year-to-date (YTD) — and now its future appears even more uncertain. This follows news that the company will be laying off thousands of workers as well as a poor earnings report that called Intel’s growth prospects into question.
When we add up all these negative factors, it’s hardly any wonder that INTC stock is crashing today. But does that mean the declines will continue for the foreseeable future? Let’s take a closer look.
What’s Happening With INTC Stock?
For the past few days, INTC stock has only gradually trekked downward. But since markets opened today, it has been plunging and isn’t showing signs of slowing down. As of this writing, shares are down 25% for the day. This current trajectory suggests the stock has further to fall.
According to reports, the Intel layoffs and dividend suspension are part of a slow turnaround campaign spearheaded by CEO Pat Gelsinger. Unfortunately for shareholders, this attempt to reverse course has only sent INTC stock plunging while these initiatives take effect. As The Wall Street Journal reports:
“Gelsinger laid out the plan to reduce costs by more than $10 billion next year as the chip maker reported second-quarter sales of $12.8 billion, down 1% and below analysts’ forecasts in a FactSet survey. Reaching that cost-reduction goal will require cutting jobs and lowering capital expenditures, among other moves, the company said.”
There’s no question that Intel should be focused on making changes after a year of trending downward. But the company is having to take several steps back in order to theoretically take steps forward down the road. Meanwhile, the AI market is growing increasingly crowded. And as InvestorPlace contributor Tyrik Torres notes, Intel’s manufacturing process is only holding it back, making INTC stock a likely loser in the ongoing chip wars.
Why It Matters
Even before the dividend pause and poor earnings report, Intel didn’t have much going for it of late. But INTC did have plenty working against it, including an overly inflated valuation compared to its industry. This should serve as a key lesson to investors that although the AI market is still booming, companies that fail to adapt quickly stand to be left behind as their market shares diminish. Per Torres, that may be exactly what we’re seeing with Intel.
INTC stock will likely keep falling as the dividend pause continues to generate uncertainty. Other tech stocks will recover from the current downturn, but investors will need to see significant progress before Intel becomes a favorite again.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
