Why Intel shares are falling and hit a new 10-year low today

Intel (NASDAQ: INTC) shares sink again in Friday trading. The chip company’s share price was down 2.1% at 3:10 p.m. ET, according to data from S&P Global Market Intelligence.

Following the disappointing August jobs numbers released today by the US Labor Department, the stock market is seeing an increase in bearish sentiment — and Intel is part of the pullback. Recent reports about the company’s manufacturing business and the possibility that it plans to sell other parts of its business also weigh on the chipmaker’s valuation.

Are investors giving up on the Fed’s ‘soft landing’?

Today’s jobs report showed that the US economy added 142,000 jobs in August. That performance missed Wall Street’s average estimate of 160,000 new jobs, but the shortfall is actually even more significant than it appears on the surface. Reacting to declines in US manufacturing and other bearish indicators, analysts and economists have already started to lower their job estimates for last month.

The disappointing jobs numbers added to fears that the economy is headed for a recession. The Federal Reserve is likely to cut interest rates at its meeting starting on September 17, but investors are increasingly uneasy about the overall macroeconomic environment. While the Fed has tried to create a “soft landing” to reduce inflation and avoid recession, investors are now worried that an economic contraction is on the horizon. A weakened macro outlook is weighing on stocks today, but that’s not the only bad news for Intel shareholders.

Uncertainty surrounds Intel’s outlook

With its Q2 report earlier this month, Intel sent signals that the company was in disarray. Quarterly margins and guidance came in significantly weaker than expected, and the company said it was pursuing major cost-cutting and restructuring initiatives that would involve laying off 15 percent of its workforce and other major moves.

According to a report published by Bloomberg after the market closed yesterday, Intel plans to sell part of its stake in Mobileye — its machine vision technology unit. The chipmaker is reportedly interested in selling as much as 88% of its equity position in Mobileye.

Reuters then reported this morning that Qualcomm was looking to buy part of Intel’s chip design business. Qualcomm is reportedly particularly interested in Intel’s client PC segment, but all design units are said to be under consideration for potential acquisitions.

The story continues

Meanwhile, other reports suggested that Intel was considering spinning off its chip business — and shareholders had to deal with bad news on the fab front. According to a report from Tom’s Hardware, Intel will no longer use its 20A process node for consumer Arrow Lake processors. Instead, the company is expected to use a node from Taiwan Semiconductor Manufacturing. This news came following a report that Broadcom had evaluated using Intel’s 18A node, but opted not to pursue it following unsatisfactory test results.

With today’s pullback, Intel stock fell to $18.64 per share — its lowest price in 10 years. While the stock might be tempting at current levels, there is little visibility into where the company will go. Recent reports suggest that the company itself may be unsure of its strengths in the highly competitive chip market.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Qualcomm and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.

Why Intel stock is falling and hitting a new 10-year low today was originally published by The Motley Fool