Intel needs 'a lot of things' to play in their favor in restructuring bid: Analyst

Intel (INTC) shares cratered after a dismal Q2 earnings report, in addition to announcing layoffs and that it was suspending its dividend.

Creative Strategies CEO and Principal Analyst Ben Bajarin noted that there were reports that the layoffs were coming but that "people had thought that the worst was behind Intel... I think all this has done has proven that's not true." Bajarin thinks this is a sign that Intel's turnaround is going to take longer than many thought.

Barjarin says that Intel has plans, but "a lot just's got to go right...there's a lot of things that have to play in their favor" for them all to be executed successfully making leadership key.

Watch the video above to hear Bajarin's take on Apple's (AAPL) third quarter results and why the launch of generative AI efforts may be "rocky."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Stephanie Mikulich

Video transcript

All right, get more on this.

We're wrapping up a big week in Big Tech, but the big move we're watching today, Intel that stock is cratering after reporting disappointing second quarter earnings results yesterday and the chip maker suspending its dividend, laying off 15,000 workers joining us.

Now talking this Ben Beer Creative Strategies, CEO and principal analyst, Ben, always great to have you on the show.

Uh So we look at this Intel print, Ben uh Miss on Q two guided Q three lower uh massive restructuring, you say Intel probably uh in, in your opinion, Ben, the biggest news of the week.

I think so.

Yeah, and I think it's because this was a bit surprising, right?

I don't think this was something that people saw coming.

Um Obviously there was a note earlier in the week that uh that was reported that some layoffs were coming, which I do think sort of set us in a position to brace for some pretty harsh numbers.

Um But honestly, you know, I think people had thought the worst was behind Intel.

I, I mean, I genuinely believe that was a, a conviction by a lot of investors and I think all this is done is proven that that's not true.

And you know, I know they've been asking investors to be patient um for a while, right?

And just buy into the broad vision of the company and the product and roadmap for uh for foundry and product.

And I think this has just come into, it's just really going to take a lot longer than hoped.

And now there's a real, real big focus much more than I think before on short term execution and product competitiveness.

And why in your opinion, Ben, why is Intel having, I mean, we knew about the long build out of the sort of long foundry plan, we knew that was going to take a while.

I, I guess the real surprise to your point is that they're not as competitive as they should be at this point with the likes of an A MD and others.

What's going on there?

Why aren't they?

So I think there's two parts to this, right?

One Intel has obviously been focused on their five nodes or 45 nodes and four year strategy, which again was their process technology and products built on their process technology.

And that's just process technology catch up right?

In A MD has been on leading edge process with DS MC, which many people, you know, consensus view would believe that that is the best process out there to be manufacturing semiconductors on.

And so the A MD has a process leadership and all at the same time competing right there with product, that's what makes this next product.

Intel is super interesting in my opinion.

And one that I think there's gonna be a lot of scrutiny on in terms of competitive competitiveness with Lunar Lake because that is the first product that Intel's making that's built 100% on Intel's TS MC.

Now Intel's packaging is, is, is, is putting that that product together, but it's being made on Ts MC Wafers.

And so this is the first time we'll actually see Intel's architecture on a, a one to one sort of competitive process with a MD.

And we really get a look at how competitive those products.

So I think that's, that's step one.

But their ultimate goal is to also now have that architecture back onto um their leading edge process, which the next one will be I think 14 A in, in their nomenclature and, and bring now product competitiveness back to process leadership at their foundry stage.

I think of all those things play out very, very positive, right?

That brings competitiveness back to their product portfolio pricing leverage as well as a dominant position to now increase their um their ID M strategy.

But a lot's just gotta go, right.

You know, I mean, that's the thing is that, that, that there's a lot of things that have to play in their favor, which is why again, I come back to short term management execution is key and um and product leadership has to be identified in the market.

Ben, I want to switch gears here and, and talk about Apple, you know, a company you, you also know so well, Ben just curious to get your take on that print and also, you know, Ben, just to see where you're at when, when it comes to kind of the argument we hear from the bulls, which is that, you know, these A I enabled features, Ben, they're gonna really spark this, this very strong upgrade cycle for iphone and, and whether you, you buy that Ben.

Yeah, I mean, I, I don't like the term supercycle.

Josh, I think we've talked to you and I've talked about this for a long time.

Um I, I think really, I, I would anticipate a stronger than normal cycle.

So, so call it whatever we estimate typical refreshes would be without a I, I think it'll be a little bit stronger than that.

I do think there will be demand.

I do think um there's gonna be enough interesting things around Apple Intelligence that get people to um have interest in that wanna upgrade their devices.

But I don't think we're gonna pull forward that many more devices like we do if we want to call it a super cycle.

Um but I think it will drive a stronger than normal cycle and, and, and I do think Apple will be the tip of the iceberg for that.

I think that will impact positively for Qualcomm as well in the Android ecosystem.

I think a lot of the A I on device stuff again coming to P CS too, which will help Intel and A MD um as a part of that as well with Qualcomm.

But I, I'm not going to call the super cycle in any of those areas, but let's just say a stronger than normal seasonal cycle is possible.

Ben, I'm, I'm really interested to see how this sort of consumer A I cycle is going to go or cycle or phenomenon or whatever it is, effect is going to be on the flip side.

When you look at enterprise, when you look at the companies that have told us what they're spending to build out A I this earnings season and investors have not really rewarded them with the exception of meta.

And then today there was a write up on a Morgan Stanley note on Microsoft that highlighted a pharmaceutical company that had pulled back on its A I spending on soft products.

I think specifically Copilot because didn't see the productivity games that it wanted to.

And I just wonder how widespread that kind of pull back is going to be, you know, how much fits and starts is this whole A I roll out going to be?

Yeah, I, I think honestly at the software level, you're absolutely right.

We're gonna hear more of these stories and it's gonna be rocky.

You know, we, we are really in a laying of, you know, digging the canals for rivers, laying the streets for cities, laying the fiber right in the ground for Telcos.

Like that's where we're at.

We're in infrastructure stage while that's still continuing to develop.

And we're seeing continuous uh development in terms of size of models, innovation and compute the need for more compute it, it's just really hard.

And in my opinion, sometimes a lot, a little bit too early to kind of estimate what that's gonna go from a software standpoint.

Because when we're, when you're early in a cycle, those lessons that you learn might not actually be the lessons that you learn over the long haul when you're making those software investments.

So I think the software side is gonna take time.

I, I, we, we hear similar conversation from C I CIO S. We do our own CTO surveys.

We see where their project spend is right now, what they're looking, looking for in terms of productivity increase.

On top of that ro I for employees, they're still optimism.

There are promising signs but nobody is moving into full deployment yet.

And until that happens, and I don't expect that to be mid to late of next year.

If not into 2026 we're really not going to see this software cycle start to kick up because we really need to get through this infrastructure cycle, which is being led by semiconductors before we can transition into that software build out stage.

I'm curious but you know, we've heard from all three cloud giants now.

Alphabet Amazon Microsoft, what do we learn during this earning season?

Just about the general state of the Great Cloud wars right now?

Yeah, I mean, all of them continuing to go big on Capex.

It feels like they all believe that the more they spend in Capex, the more they double down on that infrastructure, which I do think is interesting, all three of those names um that you that you mentioned highlight their custom silicon, their custom arm based silicon as well as part of that mode and investment in that Capex.

And so they're trying to spend and build out and, and create those moats with Capex and I don't see that change.

That continues to be a good, a great story for all semiconductor infrastructure networking.

All of that, I think the challenge is still tying that to the software story and that's why I still sort of come back to like this, the macro story for the, the data center refresh the A I server build out for um hyper scalar and even tier two tier three cloud companies on the back of the silicon infrastructure remains intact.

The software questions still are gonna be ones that we're going to wrestle with now still for another 12 months, if not longer, but we're still building out that infrastructure.

So it's a good time to still be looking at infrastructure socks because I believe that macro thesis thesis remains intact.

Building the canals, laying the streets.

Ben Veen.

Thank you very much.

Appreciate it.

My pleasure.

Anytime.