The Stock of Intel is One of the Biggest Losers in the S&P 500 This Year. What Are the Chances of Earnings Turning the Tide?

Investors in the chip sector have been primarily fixated on artificial intelligence (AI) developments, but as Intel Corp. prepares to unveil its earnings post Thursday's market close, attention may shift to other factors influencing the stock's trajectory.

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Intel, like its counterparts in the chip industry, is vying for a share of the lucrative AI hardware market. However, the tangible impact of these efforts on Intel's financial performance may still be premature.

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HSBC analyst Frank Lee expressed skepticism, suggesting that any improvements in Intel's client business might not be sufficient to offset weaknesses in its foundry, data-center, and AI segments. He highlighted that a potential resurgence in traditional non-AI server sales could serve as a pivotal catalyst for the stock's movement.

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This is particularly crucial for Intel, which has significantly lagged behind the broader sector's performance this year. While the PHLX Semiconductor Index (SOX) has seen some recent fluctuations, it remains up 10% year-to-date, outpacing the S&P 500's 5% gain. In stark contrast, Intel's stock has plummeted by 31% since the beginning of the year, marking one of the steepest declines in the S&P 500.

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According to analysts' survey, Intel is expected to report adjusted earnings per share of 14 cents for the March quarter, compared to a loss of 4 cents per share in the same period last year. Revenue is forecasted to increase to $12.8 billion from $11.7 billion.

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The consensus anticipates a 30% surge in client-computing sales to $7.5 billion, alongside a 10% decline in data-center and AI revenue to $3.3 billion. Network and edge revenue is projected to decrease by 11% to $178 million.

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Investors will also have access to new insights this time around, as Intel recently separated its product financials from its manufacturing operations to provide investors with clearer visibility into their performance, which has been somewhat divergent thus far.

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Stacy Rasgon of Bernstein emphasized that Intel's turnaround is still in its early stages, especially following recent disclosures about the foundry business, which revealed significant losses expected to expand further this year.

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Rasgon also noted that any signs of growth in Intel's personal-computing business would be well-received, considering the current sluggish trends and potential risks associated with CPU oversupply.

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Christopher Rolland from Susquehanna will be closely monitoring commentary on AI spending trends relative to traditional hardware expenditures. While AI server GPU purchases have dominated CPU wallet share, there are indications of a possible return to traditional server spending in the latter half of the year.

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