We recently compiled a list of the 20 Worst Performing AI Stocks of Last Week. In this article, we are going to take a look at where Intel Corporation (NASDAQ:INTC) stands against the other AI stocks.
US Stocks in September
This September saw a sluggish start for most US stocks, and large-cap technology stocks were no exception to this trend. The main driving factors for this development include concerns over the health of the American economy resurfacing, particularly in light of the August jobs report. The report underscored the labor market’s weakness in the US, which has not left investors feeling all that secure about the state of the economy.
On the stock side, many investor favorites in the artificial intelligence (AI) space have been doing poorly so far in September, with losses ranging from around 4% to even over 20% for the first week of September. The primary reason for this decline seems to be that investors are just not satisfied with the growth demonstrated by major AI companies at present. While growth is definitely present, it’s continuing to fall short of investor expectations, which have increased exponentially in light of the hype cycle created around AI stocks.
Are We Really In An AI Bubble?
The first week of September was actually the worst week for chip stocks recorded in over two years. Many investors are now beginning to wonder whether AI is worth the amount of money being poured into it, resulting in corporate spending on AI coming under greater scrutiny than ever before. The greater scrutiny is predominantly because of investors and analysts now thinking that many AI stocks are overhyped and overvalued and don’t have the means to justify this hype and valuation – essentially, the main concern is that we’re in an AI bubble that’s on the brink of bursting.
However, as with any high-tension market situation, there are diverging opinions as well. In his September 6 interview on CNBC’s “Closing Bell Overtime,” Deepwater Asset Management’s managing partner, Gene Munster, emphatically stated that we are not in an AI bubble. For him, the bigger problem in the AI space is that every other company today is trying to talk about AI and say that it’s working towards AI incorporation in its operations – something that’s leading to a lot of noise in the market, which is drowning out the voices of companies offering real substance in this space. He thus noted that it’s important for investors to be careful not to invest in just any company that says it’s working with AI and instead to focus on the better, perhaps more boring, options in the market.
According to Munster, the main players to keep your money in are predominantly big tech names, as these are the only companies that are poised to deliver substantial growth instead of just generating noise. However, investors are still confused about whether AI is a good place to invest in even today, which is why we’ve compiled a list of the worst performing AI stocks in September so far and explained whether these stocks are worth picking up or if they’re just temporary beneficiaries of the hype around AI.
Our Methodology
We compiled our list by screening for AI stocks that have seen declines of 10% or above in the first week of September, and then ranked the stocks based on their weekly decline as of Friday, September 6. We have also mentioned the number of hedge funds holding stakes in each stock.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A technician soldering components for a semiconductor board.
Intel Corporation (NASDAQ:INTC)
Weekly Decline: 11.04%
Number of Hedge Fund Holders: 75
Intel Corporation (NASDAQ:INTC) is a semiconductor company based in Santa Clara, California. It offers computing and related products and services worldwide.
This company may be a red flag for many investors since, on the first Tuesday of September, Intel Corporation (NASDAQ:INTC) was hit with reports that it could lose its place in the Dow Jones Industrial Average. Additionally, competitor Qualcomm is also reportedly looking into buying segments of Intel Corporation (NASDAQ:INTC), potentially including its PC chip design business. While this deal, if it comes to fruition, may be considered a positive development for Intel Corporation (NASDAQ:INTC) by some, others are concerned about the possible loss of an innovative and lucrative segment and its impact on Intel Corporation (NASDAQ:INTC) in the aftermath.
Public opinion surrounding Intel Corporation (NASDAQ:INTC) has also been negative because of its dismal second-quarter earnings report since revenue for the company fell by 1%, and adjusted EPS came in at $0.02, down from $0.13 from a year ago. Investors are also disappointed because of Intel Corporation’s (NASDAQ:INTC) underwhelming third-quarter guidance with revenue of $12.5 billion to $13.5 billion, which implies a decline of 8% at the midpoint. Additionally, the company also eliminated its dividend in the interest of cash conservation – a justifiable reason, but one that has still been off-putting for investors.
In light of all these factors, Intel Corporation’s (NASDAQ:INTC) decline in the first week of September seems to make sense. Those interested in big tech and semiconductor players in the market at present may do well by steering clear of Intel Corporation (NASDAQ:INTC) at least for the moment.
Intel Corporation (NASDAQ:INTC) was spotted in the 13F holdings of 75 hedge funds in the second quarter, with a total stake value of $1.9 billion.
Ariel Investments mentioned Intel Corporation (NASDAQ:INTC) in its second-quarter 2024 investor letter:
“Alternatively, several positions weighed on performance. One of the world’s largest semiconductor chip manufacturers by revenue, Intel Corporation (NASDAQ:INTC), underperformed in the period on news of a longer than expected turnaround in profitability within the Foundry business. This was exacerbated by disappointing near-term guidance due to a weakening demand environment signaling an extended replacement cycle. We view the quarter as a temporary trough that should dissipate as we see signs of a cyclical recovery for personal computers (PCs) and central processing units (CPUs), driven by the Windows 11 upgrade. In our view, the market is overlooking the progress Intel is making to advance its manufacturing process. Not to mention, the company’s efforts to serve as a viable second source foundry partner of leading-edge silicon. We believe the separation of the design and manufacturing businesses will be a key catalyst in unlocking improved financial performance while also enhancing the competitiveness of the foundry business.”
Overall INTC ranks 17th on our list of the worst performing AI stocks last week. While we acknowledge the potential of INTC as an investment, we believe that AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than INTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.