Lots More on the Ongoing Mess That Is Intel

SPEAKER_1 (0:03)

Bloomberg Audio Studios, podcasts, radio, news.

Joe Weisenthal (0:10)

I am worried about Intel. No, for real.

Tracy Alloway (0:13)

We're recording this on October 1st, so I'm worried about some other things, but sure, sure.

Joe Weisenthal (0:18)

No, there's plenty to worry about in the world. But I'm worried about Intel specifically because it's all nice to talk about industrial policy, and we're going to build these, you know, build out all these industries, etc. But here we have one of the true industrial giants, one of the flagship companies of the United States. Getting a lot of support, our leading company in the field of semiconductors, which is a major strategic priority for the US, and they do not seem to be doing well at all. The stock is absolutely dismal. They're cutting jobs. If this is the flagship company, like them and Boeing loomed very large in my head about, I guess what I would say is like, I don't know if corporate rot is too strong of a word, but yeah, like corporate rot.

Tracy Alloway (1:03)

Not to add to your anxiety, but did you also see some of the headlines coming out of North Carolina about quartz sand?

Joe Weisenthal (1:10)

Oh yeah, I don't know what that's all about.

Tracy Alloway (1:11)

It's kind of an interesting one. So after Hurricane Helene, there's a town called Spruce Pine, where apparently most of the world's supply of pure quartz sand comes from, and that could have an impact on the production of semiconductors. So I guess we get to unveil the bullhorn for the bullwhip effect again.

Joe Weisenthal (1:32)

We're not doing this again. Apparently we are doing this again.

I did a deadlift. One, two, three.

Tracy Alloway (1:43)

Hegemony. Barges.

Joe Weisenthal (1:46)

This is an after school special, except.

Tracy Alloway (1:48)

I've decided I'm going to base my entire personality going forward on campaigning for a strategic pork reserve in the US.

Joe Weisenthal (1:54)

Where's the best squid ink pasta?

Tracy Alloway (1:56)

These are the important questions. Is it robots taking over the world?

Joe Weisenthal (1:59)

No, I think that in a couple of years, the AI will do a really good job of making the Odd Lots podcast. And people will say, I don't really need to listen to Joe and Tracy anymore. We do have.

Tracy Alloway (2:11)

Charles Cha-ching, the perfect guest.

Joe Weisenthal (2:14)

Welcome to Lots More, where we catch up with friends about what's going on right now.

Tracy Alloway (2:18)

because even when Odd Lots is over, there's always lots more.

Joe Weisenthal (2:22)

And we really do have the perfect guest. Stacy, what's going wrong at Intel?

Stacy Rasgon (2:31)

What's not going wrong at Intel right now? They're in a tough spot, right? I mean, they are embarking on a very risky and capital-intensive strategy. I say embarking, but frankly, they've been along on the strategy for quite a few years now.

Joe Weisenthal (2:47)

Yeah, because CEO Pat Gelsinger came in in 2021 And so we're like at least three years into what is supposedly an embarkment on a new strategy. And if I just look at the stock price, it's lower than it was in 2015

Stacy Rasgon (3:01)

Yeah, in fact, you know, it's, I actually looked, I launched on the stock in June of 2009 I think it was $15 and 94 cents. So 15 or 16 years ago, and it's not that far off of there now. It's had a bit of a bounce in the recent weeks. We can talk about why, but in general, they're in a tough spot. Yeah, I mean, the biggest issue that they're having, and we can argue is the strategy, the right one or the wrong one. That's a discussion we can have, but it might be that the biggest issue is just that the core business that was supposed to support them as they rolled that strategy out is no longer really sufficient to support it anymore, but they may be too far along their path to stop, right? The whole idea was we're gonna be doubling down on manufacturing, we're gonna be building lots of factories in the US and everywhere else. We're gonna be building up a significant third-party foundry business to make parts not just for ourselves, but for other third-party customers as well.

We're getting a lot of external funding to do this and eventually we'll get there and it's gonna be great. But the problem is that these things are very intensive, like they cost a lot of money. And because of the deterioration that we've seen in Intel's core business, for a variety of reasons, the macro has not been great. They were over earning as many were during COVID and that bubble has popped. They're still losing share in many of their key markets. They've completely missed the AI revolution, which is one of the few areas of semiconductors today that's actually really on fire. And they effectively have nothing to show in that. And those markets are starting to eat into some of the core stuff that Intel does. That core business doesn't really support the path that they're on anymore. Even after the subsidies and frankly, doing some other things that are probably not, you wouldn't want to do if you didn't have to. They've been selling parts of some of their factories to private equity, getting cash for that. But even after all of that, it's still costing them a bunch of money that they don't really have anymore. They put out some targets recently that showed a path to a better company. But in 2030, it's 2024 right now. That's a long ways away. There's a lot of wood to chop between now and then, even if they can manage to execute on that. They're in a tough spot.