INTC sell warning: Why you should avoid the chip stock Intel

A decrease of 35% compared to the previous year. Intel (NASDAQ:INTC) is one of the few microchip and semiconductor stocks that investors should avoid.

The INTC share is currently the third worst performing stock in the S&P 500 benchmark index this year. Only Walgreens Boots Alliance (NASDAQ:WBA) And Lululemon Athletica (NASDAQ:LULU) performed worse.

This, while most microchip stocks, especially those related to artificial intelligence, are soaring. Over the past 12 months, shares of the rival chipmaker have risen Broadcom (NASDAQ:AVGO) have doubled, while NVIDIA (NASDAQ:NVDA) the value of the share has tripled.

Change and INTC inventory

Intel continues to struggle with a multi-year, multi-billion dollar strategy to change its business model.

Management, led by GEO Pat Gelsinger, wants Intel to move from developing microchips and processors to manufacturing them for itself and other companies.

The change, which would make Intel a microchip foundry and put it in competition with other foundries such as Taiwan Semiconductor Manufacturing Co. (NYSE:TSM), has depleted the Company’s resources and impacted its earnings.

In March of this year, Intel received $8.50 billion from the U.S. government as part of the Chips and Science Act, which aims to make America more self-sufficient in semiconductor production.

The company also expects government loans of up to $11 billion and a tax credit of up to 25 percent of qualified investments valued at more than $100 billion.

Gelsinger said Intel will use the government funds to build foundries in Arizona, New Mexico, Ohio and Oregon.

But even the billions that flowed into the company from Washington DC were not enough to get Intel’s strategy out of idle.

Intel has halted construction of a $20 billion microchip manufacturing factory in Ohio, saying business conditions and demand must improve before the plant can be completed.

This while other chip makers like Nvidia complain that they cannot keep up with global demand for their products.

New AI chips

To its credit, Intel is trying to keep up with rival chipmakers, even as it struggles to pivot its business model.

In early June, Intel introduced new AI microchips for data centers, days after competitors Nvidia and modern micro devices (NASDAQ:AMD) have each announced their latest chips.

Intel’s new Xeon 6 processor will offer better performance and energy efficiency for high-intensity data center workloads, Gelsinger said at the Computex technology conference in Taipei, Taiwan.

Six months ago, Intel launched its Xeon processor line for data centers and its Gaudi 3 processor for training AI models and chatbots.

Intel is also touting that the prices of its AI accelerator chips, Gaudi 2 and Gaudi 3, will be lower than those of its competitors. Intel recently announced details of its upcoming Lunar Lake processors, which are expected to launch in the third quarter of this year and will power AI PCs.

Although Intel’s chips are technically impressive, critics point out that they are coming to market later than those of rivals Nvidia and AMD and that Intel still has to play catch-up and lose valuable market share in the AI ​​space.

This situation has weighed heavily on INTC stock and made it a loss-maker for shareholders in the long term. Over the past five years, Intel stock has fallen by more than 30%. The shares are now only half as expensive as they were in 2021.

Sell ​​Intel shares

Investors considering buying Intel stock must ask themselves why they are doing so. Why would they bet on INTC stock, which has been a long-standing underperformer, while most other microchip and semiconductor stocks are currently on a run?

Worse still, Intel’s situation does not look like it will improve any time soon. With the company’s costly turnaround strategy likely to take several years to complete, the company’s shareholders will likely remain deep in the red for the foreseeable future.

It’s not worth it. Intel stock is a best seller.

On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.