Is it worth investing in Intel right now? What to buy, sell or avoid

Intel, once one of the biggest names in American tech, has lost more than half of its market value this year alone, left in the dust by chip designers such as Nvidia, which have capitalised on the boom in artificial intelligence spending.
So with the shares trading at their lowest level in around a decade and takeover speculation growing, is Intel one of those rare things: a value opportunity in US tech? Or with profits just a fraction of what they were three years ago, is Intel now a basket case?
Intel, which was founded in 1968, dominated the semiconductor industry for decades. But by around 2000 it began to fall behind some of its peers, missing a wave in demand for smartphone chips, and then later the chips that power AI technology. The group, which both develops and manufactures chips, has struggled to compete against Asian developers such as TSMC and Samsung in chip foundry, and designers like Nvidia. For the past few years sales have been too weak, costs too high and margins too low.
Intel hired its chief executive Pat Gelsinger to lead a rescue mission in 2021. His strategy has focused on simplifying Intel’s portfolio, investing in its AI products and slimming down the business — this summer the company announced it would lay off 15 per cent of its staff and scrapped its dividend.
Key to Gelsinger’s vision has been separating Intel’s manufacturing and chip design operations. The logic is that the manufacturing arm can then act with financial independence, bringing it more in line with other contract chip suppliers.
This has been an expensive decision. Intel’s foundry business lost $5.3 billion in the first half of this year, while most of its revenue still comes from Intel’s own needs. It has faced huge capital requirements too, with Intel burning through more than $12 billion in cash over the past four quarters. Analysts on Wall Street expect this to continue until at least next year.
Meanwhile, the design side of the business is also not faring too well. Personal computers and data centres still make up most of Intel’s chip sales. PC sales growth has improved a bit as the industry has recovered from a slowdown in demand, but the data centre business has struggled to compete with Nvidia’s artificial intelligence systems.
There has been some good news: this month Intel secured a multibillion dollar agreement with Amazon’s cloud computing arm to manufacture chips at Intel factories, as well as making custom versions of its server chips.
It is important to remember that Intel is considered a national security asset, as the only large-scale company that both designs and manufactures chips in the US. Gelsinger lobbied for the Chips Act of 2022, under which the company is likely to be given a package of up to $8.5 billion before the end of this year.
For now, though, the market remains unconvinced. Intel has never been this cheap, with its shares trading below book value, which consists mostly of its factories and intellectual property minus net borrowings. Its multiple stands at 0.9, compared with Nvidia, AMD and TSMC which trade at price to book value ratios of 51.3, 4.7 and 6.7 respectively.
That does not necessarily make Intel a good deal — reports have suggested that its rival Qualcomm has considered a takeover bid, but this could prove difficult given potential regulatory challenges in China, where much smaller transactions have taken years to get approval.
Investors must decide whether Intel is a dying company or if it is simply at a low-point in what could be a long transformation story. The latter looks less likely, given Intel’s weak financials and huge cash burn, including roughly $50 billion in debt and the enormous capital expenditure required to support its manufacturing ambitions. In a fast-changing sector with big, capable and agile competitors, shares in Intel may be best avoided for now.
Advice AvoidWhy Low valuation reflects troubled turnaround project
For investors looking for broader access to technology names and other global growth drivers, the Mid Wynd International Investment Trust could be a strong pick.
The fund, which first launched in 1981, may look different to its long-term shareholders thanks to a recent overhaul of its portfolio. The asset manager Lazard took over the investment management of the fund from the British fund house Artemis about a year ago. The new managers, Barnaby Wilson and Louis Florentin-Lee, have rejigged Mid Wynd’s investments, increasing its exposure to technology, industrial and financial companies, while pushing down its exposure to healthcare and consumer staple businesses. Of its roughly 42 holdings, fewer than 10 remain from the Artemis era.
Lazard’s strategy focuses on quality growth companies: businesses that can generate sustainable, increasing profits over the long term. As such, the trust now has 29 per cent of its portfolio invested in technology. Mid Wynd’s top holding was in Microsoft at the end of August, at roughly 5 per cent. That was followed by financial data and research firm S&P Global, at 4.3 per cent and chip manufacturer TSMC at 3.9 per cent.
While the trust describes itself as international, most of the portfolio is concentrated in the West, with just over 60 per cent of the business in America. This is followed by 8 per cent in Japan and 5.5 per cent in the Netherlands. The UK accounts for 4 per cent of the fund.
The market is gradually warming up to Mid Wynd’s new team and portfolio: the shares have risen 5 per cent so far this year, and now trade at a modest 0.9 per cent discount to its net asset value, compared with the 12-month average of 2 per cent. It compares favourably against other investment companies that back global companies too, which trade at an average discount of 9.5 per cent. Some investors may prefer to wait for the new managers to build up a longer track record at Mid Wynd, but with a high-quality portfolio, a modest discount and a reduced fee structure, the fund looks compelling.
Advice Buy
Why High-quality portfolio at a modest discount