Intel's Stock Plummets Amid Concerns Over German Plant Investments and AI Competition

Here's Why Intel's Stock Sunk Thursday

In contrast with industry peers whose stocks have been lifted by AI hopes, Intel shares are down nearly 60% in 2024. Intel (INTC) shares sank 6.1% on Thursday following reports that the semiconductor giant's progress on constructing two new chip fabrication facilities in Germany may be stalled. The company plans to build the wafer fabrication plants in Magdeburg, Germany, on the site it calls "Silicon Junction." In June 2023, Intel announced it was increasing its investment in the project to around $33 billion, having secured a government subsidy of around $11 billion to support the construction. Intel expected the Magdeburg plants to be online and producing high-performance semiconductors as soon as 2027. However, according to media reports this week, the schedule now appears uncertain. Some investors have expressed concerns that, as Intel targets significant cost reductions, the company may choose not to move forward with the plans in Germany. Intel typically focuses its fabrication capacity on producing its own chips, but the company has been working to expand its third-party fabrication services to drive growth. Given the high costs involved in constructing fabrication facilities, it remains to be seen how the capital-intensive expansion of contract fab services will fit into Intel's restructuring and cost-cutting initiatives, according to Fortune. Skepticism about Intel's fabrication plants in Germany follows the news that chipmaking rival Taiwan Semiconductor Manufacturing (TSM) has broken ground on its own $11 billion facility in Dresden. Following Thursday's losses, Intel shares are down about 60% so far in 2024. The year-to-date losses distinguish Intel stock from many peers in the semiconductor industry that have been lifted by artificial intelligence (AI) expectations. The Philadelphia Semiconductor Index (SOX) is up more than 20% this year.

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Intel (INTC -6.12%) stock suffered another day of sell-offs Thursday. The chip company's share price ended the daily session down 6.1%, according to data from S&P Global Market Intelligence. Intel lost ground again as investors weighed the possibility that the company will not proceed with the construction of two semiconductor fabrication plants in Germany. Nothing has been officially announced that would suggest that the construction plans have been abandoned, but investors have been left in the dark about the project. The two fabs were expected to be operational in 2027 and cost roughly $33 billion to build -- with a third of the cost being covered by the European Union. And while Intel hasn't provided much insight into the future of the fabs, Taiwan Semiconductor Manufacturing announced earlier this week that it had started construction on a new $11 billion fab in Germany -- with the E.U. covering half the cost. Following today's pullback, Intel stock is once again trading just slightly above its 10-year low. Is the beaten-down company an underappreciated artificial intelligence (AI) play, or an aging behemoth that will fail to deliver wins for investors? Improving Intel's manufacturing capabilities has become a key economic and national-security interest for the U.S., the E.U., and other aligned countries. While there's a good chance that the company will receive additional government funding to build new fabs, the push to grow its contract fabrication business comes at a challenging time. Building and maintaining fabs is enormously capital intensive, and Intel is in the midst of a massive cost-cutting campaign that includes laying off 15% of its global workforce, suspending its dividend, and selling off investments. Efforts to become a leading designer of high-performance processors for data centers aren't bearing much fruit yet either, and the recent introduction of AI PCs has actually created margins headwinds instead of being the profit booster some had expected. Artificial intelligence isn't driving profits for the PC and server businesses yet, and the fabrication unit is racking up high costs. Intel has served an onslaught of bad news for investors lately, and there's not much visibility to whether the company's turnaround strategy will be successful. With the stock down 60% year to date and 71% from its 10-year high, the semiconductor specialist may appeal to risk-tolerant investors seeking contrarian plays with explosive upside potential. Intel still has the benefit of entrenched business relationships, and governmental support could eventually help it build a powerful contract fab business. But if you're waiting for signs that a comeback is on track and that Intel will be an AI winner, the company hasn't delivered them yet.