Intel's struggles continue as shares tumble following disappointing first quarter earnings

All eyes are on Intel as it looks to make a comeback as a juggernaut in the chip manufacturing sector. However, the future is not looking promising as the company reported disappointing first-quarter earnings, sending its shares plummeting by 9% to their lowest level of the year.

Despite Intel's revenue no longer shrinking and its position as the largest maker of processors for PCs and laptops, first-quarter sales fell short of estimates. The company also provided a weak forecast for the second quarter, indicating weak demand.

The poor performance was a setback for CEO Pat Gelsinger, who is early in his fourth year at the helm. However, the truth is that Intel's troubles are deep-rooted and span decades. Even before Gelsinger returned to the company in 2021, Intel had already been dethroned by overseas rivals like Taiwan Semiconductor Manufacturing Co.

Gelsinger attributes this to underspending and the company is now spending billions per quarter in a high-risk bid to regain ground. The CEO has reassured investors that the company is on track to catch up by 2026.

However, this will offer little reprieve considering Intel is the worst-performing tech stock in the S&P 500 this year, down 37%. On the other hand, rivals Nvidia and Super Micro Computer, are the two best-performing stocks in the index.

Interestingly, Intel's market cap is now one-sixteenth the size of Nvidia's. It's also smaller than Qualcomm, Broadcom, Texas Instruments, and AMD, all of which were once shadows compared to Intel.

For decades, Intel has been the biggest semiconductor in terms of sales but was overtaken by Intel last year after seven straight quarters of revenue declines.

As part of its comeback strategy, Gelsinger announced that Intel will act as a factory for other chip companies that outsource their manufacturing, including Nvidia, Apple, and Qualcomm. However, whether or not it can bag these companies as customers will depend on Intel regaining "process leadership."

Intel will be keen not to repeat past mistakes in which a series of missed opportunities have contributed to its loss of dominance in the market.

Intel missed out on the mobile chip boom with the unveiling of the iPhone in 2007 and has failed to capitalize on the AI boom which has been the single biggest driving force in Nvidia’s growth.