St. James Investment cites Intel's eroding moat in Q3 letter

St. James Investment Company released its third-quarter 2026 investor letter, identifying Intel Corporation as a case study for the erosion of competitive advantages. The firm outlined a sequence of declines, beginning with manufacturing leadership, followed by performance leadership, pricing power, and finally market share. St. James noted that Intel's server market share dropped from approximately 95% in the late 2010s to a range of 50% to 70%, while its once-dominant position in the client PC market became contested.

The letter highlights that Intel, which historically generated more profit than TSMC, Nvidia, and AMD combined, is now reporting large losses while its competitors advance. St. James attributes this shift to the slow degradation of the company's defensive moat. Intel Corporation designs and manufactures semiconductors for personal computers and data centers, having relied on its manufacturing capabilities and x86 ecosystem to maintain its market position.

In the broader market context provided by the letter, St. James describes a challenging environment for value investing characterized by rising interest rates, energy prices, record government debt, and elevated stock valuations. Despite these headwinds, the S&P 500 remains near all-time highs. The firm points to U.S. equities outperforming bonds by an average of 28% annually since the pandemic, noting that U.S. households now hold 52% of their financial assets in stocks.

St. James argues that rising oil prices and long-term Treasury yields are increasing the risk of inflation and stagflation. The letter cites the 10-year Treasury yield at 5.23% and the 30-year yield at 5.55%, reflecting substantially higher borrowing costs. Consequently, the firm maintains a cautious stance on the AI-driven market, advising investors to avoid chasing narratives in favor of businesses with durable moats and valuations that offer sufficient discounts to absorb unexpected risks.

Market data accompanying the analysis shows Intel's one-month return at 7.73%, with shares trading between $32.89 and $142.35 over the last 52 weeks. On October 9, 2026, Intel stock closed at approximately $107.08 per share, resulting in a market capitalization of about $553.46 billion.

Hedge fund interest in the semiconductor maker has increased recently. Data indicates that 138 hedge fund portfolios held Intel at the end of the second quarter, up from 112 in the previous quarter. St. James did not report a specific third-quarter return for its Select Value portfolio in the letter.