Key Takeaways
- Intel shares were lower in premarket trading Wednesday after the company late Tuesday disclosed a widening loss and declining sales in its foundry business.
- The chipmaker’s foundry business reported an operating loss of $7 billion on sales of $18.9 billion last year, compared to a loss of $5.2 billion on sales of $27.5 billion in 2022.
- Intel CEO Patrick Gelsinger said he expects losses in the foundry business to peak this year before breaking even midway between now and the end of 2030.
- Investors should monitor the $39.80 level, where Intel shares find a confluence of support from the lower trendline of a broadening wedge formation and the 200-day moving average.
Shares in legacy chipmaker Intel (INTC) were more than 4% lower in premarket trading Wednesday after the company disclosed a widening loss and declining sales in its semiconductor manufacturing business, also known by investors as its foundry business.
Intel’s foundry division generated an operating loss of $7 billion on sales of $18.9 billion last year, the company said in a filing late Tuesday. By comparison, in 2022, the unit recorded a loss of $5.2 billion on sales of $27.5 billion.
Intel’s increased transparency of its foundry business forms part of CEO Patrick Gelsinger’s plans to have the unit operate more independently and start manufacturing chips for external companies. In February, the chipmaker said it has added Windows maker Microsoft (MSFT) as a future customer and has also revealed it’s nearing in on closing deals with other customers that don’t wish to be named.
As one of the few U.S.-based chip makers, the company secured $8.5 billion in grants and access to $11 billion in loans last month as part of the Biden Administration’s CHIPS and Science Act funding to bolster domestic semiconductor manufacturing. Still, ramping up chip-making facilities requires substantial capital, leaving investors feeling cautious. The company said during its fourth-quarter earnings call that its manufacturing finances were under significant pressure as it works toward process leadership and building its infrastructure.
The chipmaker, which named Lorenzo Flores as chief financial officer (CFO) of Intel Foundry, expects losses in the foundry business to peak this year before breaking even midway between now and the end of 2030. “Intel Foundry is going to drive considerable earnings growth for Intel over time. 2024 is the trough for foundry operating losses,” Gelsinger said Tuesday, CNBC reported.
The Intel share price has oscillated within a broadening wedge formation since March last year, establishing clear support and resistance areas in the process. If the stock continues to track lower following Tuesday’s news, investors should keep a close eye on the $39.80 area, where the price finds a confluence of support from the wedge pattern’s lower trendline and the rising 200-day moving average. A fall below this crucial chart level could see a move down to lower support around $33.20.
Intel shares were down 4.6% at $41.92 at around 8:15 a.m. ET Wednesday.
UPDATE—April 3, 2024: This article has been updated after publication to include recent share price information.
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