Prof G Markets: Will Boeing and Intel Recover? — ft. Aswath Damodaran

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0:00:12 – Hi, Prophogy fans, it’s Ed,
0:00:14 dropping in to share an episode of Prophogy Markets
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0:00:25 This week on Prophogy Markets,
0:00:27 we spoke with one of our favorite guests,
0:00:29 Professor Aswath Damodaran.
0:00:31 We talked about tech earnings,
0:00:33 what Wall Street thinks of Harris and Trump,
0:00:36 and we spoke about some fallen heroes in the stock market.
0:00:37 Here’s a clip.
0:00:39 – I think the prompt for Intel is,
0:00:41 they were at the top for so long
0:00:44 that their story is where the biggest, where the best.
0:00:49 And when that slipped, they wanted to go back to the top.
0:00:51 I mean, think about what they’ve done over the last 10 years.
0:00:54 It’s not that they haven’t tried to do the things
0:00:55 that would make them successful.
0:00:57 I think they’ve tried too hard.
0:00:58 Tried too hard in what sense?
0:01:01 They tried to out TSMC, TSMC
0:01:03 with the Intel Foundry huge investments
0:01:07 in manufacturing chip saying we too can be like TSMC.
0:01:10 They’ve invested, I think after Nvidia,
0:01:11 perhaps even more than Nvidia,
0:01:13 they’ve thrown in billions of dollars
0:01:15 into developing the next AI chip.
0:01:17 ‘Cause they’re convinced
0:01:19 that they can out Nvidia, Nvidia.
0:01:21 And I think in the process they’ve overreached.
0:01:23 I call it metuism on steroids
0:01:25 because that’s basically what Intel has done
0:01:28 for the last five years is, me too, I can do that.
0:01:32 And I can do it five times more expensively than you can.
0:01:34 Now, I remember going into Intel six or seven years ago,
0:01:37 I went to their offices and I was talking to their,
0:01:41 they asked me to come in and speak to their general audience.
0:01:43 And what I noticed about Intel as a company
0:01:45 was the absence of energy.
0:01:48 You don’t get that sense of excitement and energy
0:01:49 and wasn’t there anymore.
0:01:52 And it’s tough to be in the business that Intel is in
0:01:55 without that driving the choices.
0:01:57 I do think though that it’s been oversold.
0:02:00 I think at, especially when it dropped below $20 per share,
0:02:03 you were effectively assuming that Intel
0:02:06 would shrink over time and its margins would go away.
0:02:09 Intel has a couple of advantages still
0:02:11 that can work in its favor.
0:02:14 One is the inflation reduction act, as you know,
0:02:19 put as a priority chips made in the US.
0:02:21 DSMC has built a factory in the US,
0:02:24 but Intel is supremely well positioned
0:02:28 to take advantage of the subsidies that come out of that.
0:02:32 So if Intel can find its feet on the foundry business,
0:02:33 there’s a way back.
0:02:36 And I think that as long as they don’t try too hard
0:02:39 and accept the fact that they will not dominate AI,
0:02:41 that battle’s lost, Nvidia will,
0:02:43 but they have a niche portion of the AI business
0:02:44 they can go after.
0:02:47 I think there’s a pathway back to middle age,
0:02:50 not great growth, but middle age for Intel.
0:02:52 And at less than $20 per share,
0:02:57 I thought it was a pretty good bargain as an investment.
0:03:01 I own Intel now, so I’ve got to be quite open about that.
0:03:04 I did it after I wrote the piece and I looked at
0:03:08 what would happen if they became a 3% growth company
0:03:10 and the margins slipped by three or 4%
0:03:12 and there were $28 per share
0:03:14 with those assumptions built in.
0:03:15 I can live with those assumptions.
0:03:19 I think the odds are, in fact, in your favor and Intel.
0:03:21 Boeing, though, is an entirely different story.
0:03:25 I mean, I’ve never seen a company blow up its reputation
0:03:28 as thoroughly and as completely as Boeing has done
0:03:29 over the last 20 years.
0:03:33 I mean, it’s one of the great engineering companies
0:03:34 in the world.
0:03:35 I mean, a company that was, you know,
0:03:40 people went to because it’s superb, superb engineering
0:03:43 and technology knowledge, trusted in many dimensions.
0:03:46 The only reason Boeing is afloat
0:03:48 is because it’s in a duopoly.
0:03:52 I mean, that’s a reality, is this company
0:03:56 has so thoroughly trashed its credibility in markets
0:03:59 that in any other market, we’d be talking about rap,
0:04:02 you know, winding up the story
0:04:05 and selling the assets to others.
0:04:06 I do think they’re thinking
0:04:08 about selling their space division now
0:04:11 and that’s the first phase in a company saying
0:04:14 we’re in trouble, we’re going to sell off our crown jewels
0:04:16 because we have to survive.
0:04:18 They’re in complete survival mode
0:04:21 and I don’t know an easy pathway back to credibility
0:04:23 because once people get the perception
0:04:25 that you cannot be trusted,
0:04:28 that your products are not safe.
0:04:33 Which for an aircraft manufacturer is diabolically dangerous.
0:04:35 It’s very difficult to find a pathway back.
0:04:37 So Boeing, I would not buy at any price simply
0:04:40 because I think there are too many things
0:04:43 that can go wrong here, that can cause the company,
0:04:47 if not to go bankrupt, at least to be taken into receivership
0:04:50 by somebody that might maintain the assets and run it.
0:04:53 But you know, the company is in serious, serious trouble.
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0:05:13 ♪ Lifetimes ♪
0:05:19 ♪ You help me ♪
0:05:22 ♪ In kind ♪
0:05:26 ♪ Reunion ♪
0:05:28 (upbeat music)