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Why Intel’s reliance on federal funding could hurt its future

admin by admin
January 31, 2025
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Why Intel’s reliance on federal funding could hurt its future
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Intel Corp (NASDAQ: INTC) is looking at the US government to be its savior, and that’s part of the problem that’s been standing in their way of a meaningful recovery, says Ed Snyder of Charter Equity Research.

The government can only help the chipmaker with cash, but what it really needs is a change of strategy and a change of culture and “the government isn’t going to do that” for Intel, he added.

Snyder’s remarks arrive a day after Intel reported market-beating results for its fourth financial quarter but issued disappointing guidance for the future.

Intel stock is currently down more than 55% versus its 52-week high.

Why isn’t federal funding the solution for Intel?

Intel finalised a $7.86 billion grant from the US government aimed at helping it set up new factories in Q4.

However, Snyder questioned the reliability of federal funding and what it could mean for the semiconductor company in the long run as he spoke with CNBC today.

“We could do a 30-minute show just on all the disasters the government has invested in that didn’t get off the ground to begin with,” he added.  

Nonetheless, Intel tock does currently pay a dividend to appear a bit more attractive to the income investors.

Intel continues to be a laggard in AI

Another major problem with Intel is that it’s “in the crowd watching the play go off but not participating” in the data centre space.

Intel is a provider of CPUs to the data centres, but is not particularly active in the “AI clusters and power supplies and all the networking” where the big action lies, according to Ed Snyder.

However, a Chinese startup DeepSeek recently launched a lower-cost, immensely powerful AI model that suggests the very high-end chips are not needed for artificial intelligence in the first place.

So, if the industry starts moving away from the high-end GPUs, Intel could benefit considering it has long been criticized for its less powerful products compared to the likes Nvidia.

What DeepSeek’s AI model means for INTC

Nonetheless, the DeepSeek announcement doesn’t mean Intel is entirely out of the woods.

That’s because it has decided not to release its next-gen GPU, Falcon Shores, due to performance issues and stiff competition.

Instead, the Nasdaq listed firm is now committed to developing a system-level solution called Jaguar Shores.

So, while the DeepSeek model’s findings bode well for Intel, the company still needs to address its broader strategy related challenges and performance issues to truly compete in the AI market.

Intel guided for breakeven profit on up to $12.7 billion in revenue for its first quarter on Thursday.

Analysts, in comparison, were at 9 cents a share and $12.87 billion in revenue.

Earlier in January, there were reports that a new name is now interest in buying Intel.

The post Why Intel’s reliance on federal funding could hurt its future appeared first on Invezz

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