Down 35% on the year, Intel (NASDAQ:INTC) stock is one of the few microchip and semiconductor plays that investors should avoid.
INTC stock is currently the third worst performer in the benchmark S&P 500 index this year. Only Walgreens Boots Alliance (NASDAQ:WBA) and Lululemon Athletica (NASDAQ:LULU) have performed worse.
This as most microchip stocks, particularly those associated with artificial intelligence, skyrocket. In the last 12 months, shares of rival chipmaker Broadcom (NASDAQ:AVGO) have doubled, while Nvidia (NASDAQ:NVDA) stock has tripled.
Change and INTC Stock
Intel continues to struggle with a multi-year, multi-billion dollar strategy to change its business model.
Management, led by GEO Pat Gelsinger, want Intel to move from designing microchips and processors to manufacturing them for themselves and other companies.
The change, which would make Intel a microchip foundry and see it compete against other foundries such as Taiwan Semiconductor Manufacturing Co. (NYSE:TSM), has zapped the company’s resources and hurt its earnings.
In March of this year, Intel received $8.50 billion from the U.S. government through the “Chips and Science Act” that aims to make America more self-sufficient at making semiconductors.
The company also expects to receive federal loans up to $11 billion and a tax credit benefit on up to 25% of more than $100 billion in qualified investments.
Gelsinger has said that Intel will use the government funds to build foundries in Arizona, New Mexico, Ohio and Oregon.
But even the billions funneled to the company from Washington, D.C. hasn’t been enough to shift Intel’s strategy out of neutral gear.
Intel has halted construction on a $20 billion microchip manufacturing plant it was building in Ohio, saying that business conditions and demand need to improve before it can complete the facility.
This as other chipmakers such as Nvidia complain that they can’t keep up with global demand for their products.
New AI Chips
To its credit, Intel has been trying to keep pace with rival chipmakers even as it struggles to shifts its business model.
Earlier in June, Intel unveiled new AI microchips for data centers days after rivals Nvidia and Advanced Micro Devices (NASDAQ:AMD) each announced their latest chips.
Intel’s new Xeon 6 processor will deliver better performance and power efficiency for high-intensity data center workloads, said Gelsinger at the Computex technology conference in Taipei, Taiwan.
Six months ago, Intel launched its Xeon line of processors for data centers, as well as its Gaudi 3 processor for training AI models and chatbots.
Intel is also touting the fact that prices for its Gaudi 2 and Gaudi 3 AI accelerator chips will be lower than rival chips. Even more recently, Intel revealed details for its upcoming Lunar Lake processors that are expected to ship in this year’s third quarter and power AI personal computers.
While Intel’s chips are technically impressive, critics point out that they’re shipping later than the chips of rivals Nvidia and AMD, and that Intel continues to play catch-up and lose valuable market share in the AI space.
This situation has weighed heavily on INTC stock, making it a long-term loser for shareholders. Over the past five years, Intel stock is down more than 30%. The shares are half the price they were at in 2021.
Sell Intel Stock
Investors considering buying Intel’s stock need to ask themselves why? With most other microchip and semiconductor stocks rallying right now, why bet on INTC stock, which has been a long-term underperformer?
Worse, it doesn’t look like Intel’s situation is going to improve anytime soon. With its costly turnaround strategy likely to take several more years to complete, shareholders of the company are likely to remain deep in the red for the foreseeable future.
It’s not worth it. Intel stock is a sell.
On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.