The Wonderland of Intel Stock

[siliconbruh999]

How can a company that spent $123.92 billion in CapEx and $93.545 billion in R&D from 2020 to 2025 end up with shrinking revenue, net losses, and negative free cash flow in a market that’s booming? Even worse, according to last week’s earnings call, Intel admitted it still can’t produce enough of the products customers actually want to buy, despite six years of massive capital spending. Something is very wrong.

bad decisions regarding products

 

[Yunus]

OK, this is weird. Since when do cloud computing companies buy "more and better CPUs", but they placed orders for "thousands of older CPUs"?

May be to re-use all the DDR4 ram they have now that DDR5 is too expensive.

 

[blueone]

May be to re-use all the DDR4 ram they have now that that DDR5 is too expensive.

I doubt it, but that's an interesting notion.

 

[dkr1986]

It’s more than just a timing issue. Regardless of where Intel directed its capital expenditures, the core purpose of CapEx is to expand and support the company’s manufacturing capacity. Intel spent an enormous $123.92 billion in CapEx from 2020 to 2025, or $94.867 billion from 2021 to 2024 alone. Yet during this period, Intel’s revenue began a multi‑year decline, net profit turned into net losses, and the company started burning cash a lot faster than it could generate it.


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Is Intel telling the truth? Certainly. But is Intel presenting the full picture? I don’t believe it is.

For example, did Intel shift some expenses into CapEx, something that is completely legal, to make other numbers look better? That could be one of the reasons why Intel’s reported CapEx appears huge but ineffective, even if it is technically within accounting rules.

Beginning in January 2023, Intel shifted to an eight‑year depreciation schedule for its fab equipment, replacing the previous five‑year schedule, while TSMC continues to use a five‑year schedule. Even with this substantial reduction in depreciation expense compared with the old method, Intel still can’t generate a profit.

How can a company that spent $123.92 billion in CapEx and $93.545 billion in R&D from 2020 to 2025 end up with shrinking revenue, net losses, and negative free cash flow in a market that’s booming? Even worse, according to last week’s earnings call, Intel admitted it still can’t produce enough of the products customers actually want to buy, despite six years of massive capital spending. Something is very wrong.

Capital expenditure is investment for future growth of the business. Also in semiconductor industry, an investment in R&D done now is at least 3-4+ years away from showing up as Revenue on the Income statement. For a company like Intel where there was a huge technical debt on both products side as well on manufacturing side, most of this investment went into leveling the playing field or getting caught up to competition. Their products are improving gen by gen. Look at Panther Lake reviews on 18A released today. Its blowing competition out of the water. This is one of result of those investments.

Most of the loss in Revenue in Intel's financial statement is result of not investing 2021-2024 kind of money into R&D & capital investment by previous managements (who preferred to spend similar money on stock buybacks and dividends while also not investing in future growth of the business). So, competitors have made inroads and taking revenue share. It remains to be seen if Intel can reverse this with the kind of investment in 2021-2024 (To me it looks promising and possible, that is why I own lot of INTC).

It is also compounded by return to normal after above normal business growth during COVID on client PCs, customers extending life of DC servers and complete disruption of CPU based business with rise of AI. It is actually remarkable achievement how Intel managed to survive this well on this kind of onslaught of competition & disruptions.

Now industry is coming back to importance of CPUs if they are to extract value out of AI through agentic AI (to orchestrate the Agents & to make the underlying tools run faster leverage recent gen CPUs), I think they will be a very good position to bring in revenue over coming months.

 

[MKWVentures]

That's fair - I had read that some environments experienced a failure rate as high as 50% when using Core i9 for gaming servers -- and I've seen some other reports of double digit failure rates for certain Xeon spec chips and other Raptor Lake CPUs.

That said, I can't convert this to actual quantity, as it's not easy to determine what the failure rate per SKU is. But it's definitely a headwind on Intel 7 availability..

Some detail:

Game publisher claims 100% crash rate with Intel CPUs – Alderon Games says company sells defective 13th and 14th gen chips

No amount of BIOS or firmware updates fix the problem.

www.tomshardware.com

- a Publisher reporting 100% crashing in certain scenarios
- Level1techs reported 50% failure in Core i9 gaming servers (he has receipts for this)

thats the way all these things work. Lots of hype, some applications scream about it. lots of PR disasters. 10% failure rate under test does not mean 10% return rate or anything close to that

the actual impact on any returns and any OEMs actually changing buying strategy is not material or a major impact to Intel 7 shipments.