Intel Down Nearly 40% YTD: A Buying Opportunity for Dividend Investors?

Intel, once a glamorous semiconductor manufacturer, has suffered several setbacks in recent years due to its rigid business model and underinvestment in high-growth areas. While competitors like NVIDIA, AMD and Taiwan Semiconductor Manufacturing Company have thrived, Intel has plummeted by 36% year to date, making it the worst-performing tech stock in the S&P 500.

Intel’s troubles began when it missed the mobile chip boom by failing to secure a deal with Apple Inc. The mobile chip market, now worth $23.7 billion, is dominated by TSM. Intel’s rigid business model has also contributed to the loss of its semiconductor market share to TSM and chips business to NVIDIA and AMD.

However, Intel is overhauling its business model and making significant efforts to catch up with the competition. CEO Patrick Gelsinger states that the company is accelerating its efforts to close the technology gap created by a decade of underinvestment, aiming to catch up by 2026.

Despite its challenges, Intel remains the undisputed champion in the CPU manufacturing industry, with half of its revenues coming from this segment. Canalys, a leading global technology market analyst firm, predicts that global PC shipments will explode in 2024 and 2025, driven by AI-enabled PCs. Analysts predict that Intel’s year-over-year revenues from this segment will grow by 11% in 2024 and 21% in 2025.

Intel is also expected to benefit from its Data Center and AI segment, which accounts for about 30% of its total revenues. The company’s recently released Gaudi 3 AI accelerator outperforms NVIDIA’s H100 GPU by 50% in AI tasks while being cheaper and more energy efficient.

As Intel works to reclaim its position as a market leader in the chip industry, the stock could be a good buy for long-term investing. Currently trading at the bottom of its 52-week low, Intel presents an opportunity to buy at a discount.

For income investors, Intel offers a dividend yield of 1.62% and has increased its dividend for eight consecutive years.

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