Motley Fool Money: Intel Can’t Stop Cutting

Release Date: July 28, 2025

Introduction

In the latest episode of Motley Fool Money, host Tim Byers and semiconductor analyst Jose Najaro delve deep into Intel's recent financial performance and strategic restructuring. The discussion extends to broader semiconductor industry trends, including insights into major players like ASML, TSMC, and Nvidia, as well as an engaging segment on the semiconductor value chain.

Intel's Earnings and Strategic Restructuring

Tim Byers initiates the discussion by addressing Intel’s recent earnings report and its concerning implications.

• Earnings Performance: Intel's latest earnings release was underwhelming, prompting significant strategic shifts. Tim highlights key points from the release:

  "Intel will no longer move forward with planned projects in Germany and Poland. The company also intends to consolidate its assembly and test operations in Costa Rica into its larger sites in Vietnam and Malaysia. In addition, Intel will further slow the pace of construction in Ohio... it is like a big stop sign is on display at Intel headquarters here." (00:45)

• Reduction in Future Construction: Jose elaborates on the financial adjustments:

  "Future construction was expected to be around $50 billion. And now with all those delays and all those kind of halting... $50 billion dropped down to $35 billion, a massive $15 billion in reduction on future construction." (01:03)

• Leadership Shift: The CEO, Lip Bhutan, is portrayed as taking a more cautious and strategic approach compared to prior management:

  "Li Bhutan still wants to continue with this market, but he wants to do it at what I consider a smart way of expansion." (01:41)

• Restructuring Costs: Highlighting the financial impact of restructuring:

  "$1.9 billion in restructuring charges... and $800 million of non-cash impairment and accelerated depreciation." (02:58)

• Workforce Reduction: Significant layoffs are underway to streamline operations:

  "Intel has had over 100,000 employees. He wants to drop that down to 75,000 by the end of this year." (04:12)

Durability of Intel for the Long Term

• Analyst's Perspective: Jose discusses the long-term outlook for Intel amidst current challenges:

  "If I was to get some form of profitability, it would definitely be... 2028, maybe even 2029." (06:17)

• Host's Prediction: Tim concurs with a cautious long-term view:

  "I'm going to go with 2030." (07:11)

Other Semiconductor Earnings and Market Dynamics

ASML's Performance Amid Tariffs

• Earnings Overview: Despite meeting top and bottom line expectations, ASML faces forecasting challenges due to tariffs.

  "ASML... the top and bottom line expectations... tariffs have made forecasting impossible for the moment." (07:53)

• Industry Position: ASML's critical role in the semiconductor manufacturing process is emphasized:

  "ASML... only really has a handful of big customers... TSMC, Intel, Samsung." (08:35)

• Long-Term Outlook: Despite short-term uncertainties, the long-term prospects remain strong:

  "The long term tailwind for long term investors is still pretty much on the good side of ASML." (09:18)

TSMC's Robust Growth

• Revenue Growth: TSMC reported a 44% year-over-year revenue increase, though it missed expectations.

  "TSMC continues to see nice strong growth." (10:18)

• Market Dominance: TSMC's essential role in the global semiconductor supply chain is highlighted as a stabilizing factor.

Market Expectations and Semiconductor Cyclicality

• AI Chip Market: There's a notable emphasis on the AI semiconductor segment, with some expectations possibly being overly optimistic.

  "The one that's running hot and might have too much expectations would be more the AI chip market." (10:57)

• Industry Growth Projections: The Semiconductor Industry Association projects global sales growth, albeit with a slight deceleration:

  "Annual global sales across all semiconductors are on track to grow 11.2% in 2025 and 8.5% in 2026." (12:01)

• Cyclical Nature: Jose attributes the growth projections to the cyclical nature of the semiconductor business and potential consumer spending fluctuations:

  "It's part of the cycle... uncertainties of how consumers are going to be doing with spending." (12:35)

Semiconductor Value Chain Trivia and Stock Rankings

Value Chain Overview

Tim engages listeners with a trivia segment on the semiconductor value chain, outlining its seven key components:

1. Electronic Design Automation (EDA):

   • Companies like Cadence specialize in software tools for designing semiconductors.

2. Chip Design (Fabless Companies):

   • Firms such as Nvidia focus on designing chips without owning manufacturing facilities.

3. Raw Materials and Equipment:

   • Essential materials like silicon and equipment manufacturers like ASML and Lam Research fall here.

4. Wafer Fabrication:

   • Companies involved in the actual manufacturing of semiconductor wafers.

5. Assembly, Packaging, and Testing (OSAT):

   • Firms that handle the final stages of semiconductor production.

6. Integrated Device Manufacturers (IDMs):

   • Companies like Intel that design and manufacture their own chips.

7. Distribution and OEMs:

   • Entities that distribute semiconductors and incorporate them into end products like PCs and smartphones.

Stock Performance Rankings

Jose ranks six companies within the semiconductor value chain based on their ability to outperform over the next five years:

1. ASML

   • Rationale: Despite current market underestimations, ASML's long-term growth prospects remain robust.

   • "The market is not expecting a lot from them but I think the overall long term tailwind is there." (19:16)

2. Nvidia

   • Rationale: Positioned strongly in the AI market, which is anticipated to experience significant growth.

   • "AI is going to do more than that. ... we're just in the search and kind of some research of it." (19:34)

3. LAM Research

   • Rationale: Unique position in the memory market with innovative solutions.

   • "LAM Research provides equipment to build a lot of these HBM solutions." (19:35)

4. Micron

   • Rationale: Despite cyclical risks, ongoing innovation in memory solutions like HBM ensures future growth.

   • "Micron has a nice future from here." (20:50)

5. TSMC (Taiwan Semiconductor Manufacturing Company)

   • Rationale: Essential to global semiconductor supply with consistent growth.

   • "TSMC continues to see nice strong growth." (20:51)

6. Cadence

   • Rationale: Vital in the EDA segment, but current valuations may pose challenges.

   • "If we had a better price point, Cadence would definitely be a little bit higher." (21:18)

Conclusion

The episode paints a comprehensive picture of Intel's current challenges and strategic pivots, set against the broader backdrop of the semiconductor industry's dynamic landscape. While Intel grapples with significant restructuring to ensure long-term viability, other key players like ASML and TSMC continue to demonstrate resilience and growth potential. The discussions underscore the cyclical nature of the semiconductor market, tempered by emerging opportunities in AI and advanced technologies.

Notable Quotes

• Jose Najaro:

  "The main concept that was going is prior management seemed to have kind of like an open check on building all these different fabs and buying all these different equipment because they expected demand to eventually pick up." (01:41)

• Tim Byers:

  "The cutbacks, the reframing, what do you think this says about the durability of intel for the long term?" (04:12)

• Jose Najaro:

  "AI is going to do more than that. We're still in early innings." (19:34)

Timestamps

• 00:05: Introduction to Intel's earnings.
• 00:45: Discussion on Intel's earnings report.
• 01:03: Financial adjustments and construction cuts.
• 01:41: CEO Lip Bhutan's strategic shift.
• 02:58: Restructuring costs and financial impact.
• 04:12: Workforce reduction plans.
• 06:17: Long-term profitability projections for Intel Foundry.
• 07:11: Tim's prediction for Intel's turnaround.
• 07:53: ASML's earnings review.
• 08:35: ASML's market position and customer base.
• 10:18: TSMC's revenue growth and market dominance.
• 10:57: Market expectations for AI chip market.
• 12:01: Semiconductor Industry Association's growth projections.
• 12:35: Cyclical nature of the semiconductor business.
• 19:16: Jose's ranking of ASML.
• 19:34: Nvidia's position in AI.
• 20:50: Micron's future prospects.
• 20:51: TSMC's essential role.
• 21:18: Cadence's valuation challenges.

This summary was crafted to provide a comprehensive overview of the "Intel Can’t Stop Cutting" episode of Motley Fool Money, capturing the essence of the discussions and insights shared by Tim Byers and Jose Najaro.