Intel stock drops after downgrade by Goldman Sachs

Intel’s (INTC) pioneering chip-making technology, which has been an inspiration for several emerging semiconductor companies, seems to have lost some sheen. Concerned about the lackluster progress in adopting new technologies, rating agency Goldman Sachs Friday downgraded the company’s stock to SELL from NEUTRAL.

Following the downgrade, the stock dropped more than 3% in the pre-market trading Friday, extending the loss it suffered last month after releasing earnings for the second quarter. The last stock selloff, despite better-than-expected quarterly results, was triggered by concerns over the company’s inability to transition its products to the latest technology and stay competitive.

Goldman cited issues pertaining to the Intel’s chip manufacturing operations for the downgrade, which might have come as a surprise to many in a market that seldom doubted the technical prowess of the second-largest microprocessor manufacturer in the world.

Goldman cited issues pertaining to the Intel’s chip manufacturing operations for the downgrade

The agency, which is particularly unhappy about the ‘repeated’ delays on the part of Intel in migrating to next-generation technology, termed the manufacturing issues a ‘big problem’. “We see Intel’s struggles with 10nm process technology having ramifications in terms of its competitive position – across a broad set of products,” said a Goldman analyst.

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Shedding light on the seriousness of the issue, the analyst said the company’s trouble with the 10nm process technology could be detrimental to its competitive position in various products.  According to him, Intel lags behind its rivals in that area, and the issue is more deep-rooted than widely perceived. If the problem is not addressed with the required importance, it could be a drag on market share in the long term.

Recently, Intl announced that its 10-nanometer chips will be released in 2019 even as AMD is preparing to roll out its 7-nanonmeter series towards the end of this year.

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Intel shares gained about 8% since the beginning of the year. The stock hit a peak in mid-June but pared the gains in the following sessions.