The Prof G Pod with Scott Galloway
Prof G Markets: Will Boeing and Intel Recover? — ft. Aswath Damodaran
Fri, 01 Nov 2024
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Chapter 1: What are the key topics discussed in this episode?
Thank you. Hi, ProfG fans. It's Ed, dropping in to share an episode of ProfG Markets that we do not want you to miss. We are on our own separate feed now. So type in ProfG Markets wherever you get your podcasts and hit follow to stay up to date. This week on ProfG Markets, we spoke with one of our favorite guests, Professor Aswath Damodaran.
We talked about tech earnings, what Wall Street thinks of Harris and Trump, and we spoke about some fallen heroes in the stock market. Here's a clip. I think...
The problem for Intel is they were at the top for so long that their story is we're the biggest, we're the best. And when that slipped, they wanted to go back to the top. I mean, if you think about what they've done over the last 10 years, it's not that they haven't tried to do the things that would make them successful. I think they've tried too hard. Tried too hard in what sense?
Chapter 2: What challenges is Intel facing in the market?
They tried to out TSMC, TSMC with the Intel Foundry, huge investments in manufacturing chips saying, we too can be like TSMC. They've invested, I think, after NVIDIA, perhaps even more than NVIDIA, they've thrown in billions of dollars into developing the next AI chip because they're convinced that they can out NVIDIA, NVIDIA. And I think in the process, they've overreached.
Chapter 3: Has Intel overreached in its strategy?
I call it me too-ism on steroids because that's basically what Intel has done for the last five years is me too, I can do that. And I can do it five times more expensively than you can. Now, I remember going into Intel six or seven years ago. I went to their offices and I was talking to their, you know, they asked me to come in and speak to their, as a general audience.
And what I noticed about Intel as a company was the absence of energy. You don't get that sense of excitement and energy. It wasn't there anymore. And it's tough to be in the business that Intel is in without that driving the choices. I do think, though, that it's been oversold.
Chapter 4: What is the significance of the Inflation Reduction Act for Intel?
I think, especially when it dropped below $20 per share, you are effectively assuming that Intel would shrink over time and its margins would go away. Intel has a couple of advantages still that can work in its favor. One is the Inflation Reduction Act, as you know, put as a priority chips made in the U.S.,
Chapter 5: Can Intel recover and regain its market position?
DSMC has built a factory in the US, but Intel is supremely well-positioned to take advantage of the subsidies that come out of that. So if Intel can find its feet on the foundry business, there's a way back. And I think that as long as they don't try too hard and accept the fact that they will not dominate AI, that battle's lost.
NVIDIA will, but they have a niche portion of the AI business they can go after. I think there's a pathway back to middle age Not great growth, but middle age for Intel. And at less than $20 per share, I thought it was a pretty good bargain as an investment. I own Intel now, so I've got to be quite open about that. I did it after I wrote the piece and I looked at
Now, what would happen if they became a 3% growth company and the margins slipped by 3% or 4% and there were $28 per share with those assumptions built in? I can live with those assumptions. I think the odds are, in fact, in your favor in Intel. Boeing, though, is an entirely different story.
I mean, I've never seen a company blow up its reputation as thoroughly and as completely as Boeing has done. over the last 20 years. I mean, it's one of the great engineering companies in the world. I mean, a company that was, you know, people went to because it had superb, superb engineering and technology knowledge, trusted in many dimensions.
The only reason Boeing is afloat is because it's in a duopoly. I mean, that's a reality, is this company has so thoroughly trashed its credibility in markets that in any other market, We'd be talking about wrap, you know, winding up the story and selling the assets to others. I do think they're thinking about selling their space division now.
And that's the first phase in the company saying, we're in trouble. We're going to sell off our crown jewels because we have to survive. They're in complete survival mode.
And I don't know an easy pathway back to credibility because once people get the perception that you cannot be trusted, that your products are not safe, which for an aircraft manufacturer is diabolically dangerous, it's very difficult to find a pathway back. So Boeing, I would not buy at any price simply because I think there are too many things that can go wrong here.
that can cause the company, if not to go bankrupt, at least to be taken into receivership by somebody that might maintain the assets and run it. But, you know, the company is in serious, serious trouble.
Lifetime
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