Intel stock has pulled back into a bear market as investors dump high-flying artificial intelligence (AI) companies. The shares have slumped 34% from their all-time high, with the company’s market capitalization falling from $707 billion to $493 billion. According to the Wyckoff Method, the stock could drop further.
Wyckoff Theory suggests that Intel stock has more downside to go
One way of understanding the recent Intel price action is known as the Wyckoff Theory. This theory suggests that assets go through four different stages: accumulation, markup, distribution, and markdown.
In Intel’s case, the chart below shows that the stock remained in the accumulation phase for years. In this period, it formed a shallow cup-and-handle pattern between December 2023 and January this year. A C&H pattern normally leads to more upside over time.
The stock then surged and moved to the markup phase. This price action coincided with the rescue by the US government and Nvidia, which has now become its biggest shareholder. It also coincided with the surge in companies in the artificial intelligence boom.
Recently, however, there are signs that the stock has moved to the distribution phase. This distribution is then followed by the markdown stage, which is characterized by panic selling among investors.
Therefore, the stock will likely have a bearish breakout, potentially to the 50% Fibonacci Retracement level of $80. A drop below that level will point to more downside towards the 61.8% retracement at $65.
INTC chart | Source: TradingView
Intel to publish earnings next week
INTC stock has dropped in the past few months as investors have remained concerned about the artificial intelligence bubble. Citadel’s Ken Griffin and Ray Dalio have all warned that the AI bubble may burst as soon as this year as interest rates remain at an elevated level.
The next important catalyst for the INTC stock will be next week’s earnings report, which is expected to show that its revenue growth continued. In its last report, Intel said that demand for its products was so strong that it was forced to sell lower-level ones. This growth will likely continue as the AI agent industry gains momentum.
The results showed that its revenue jumped by 25% in the second quarter to $16.1 billion, a strong comeback for a company that was on the verge of collapsing. Its client computing and physical AI group’s revenue jumped by 13% to $8.9 billion, while its data center and AI business made $6.3 billion, a 59% annual growth.
Analysts expect the upcoming results to show that Intel’s revenue jumped by 20% to $16.47 billion. The most optimistic analyst expects the real figure to be $17 billion, which is possible based on the recent earnings by companies like Micron and Samsung.
Its profits are also expected to continue rising. Analysts see the EPS rising to $0.40, up sharply from $0.23 in the same period last year. For the year, the EPS is expected to come in at $1.53, up sharply from the 42 cents it made last year.
The main risk that Intel faces is a broader slowdown in the AI industry, which some analysts believe is a possibility. It is also facing substantial competition risk from Nvidia, which launched its CPU recently.
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