Intel‘s (NASDAQ:INTC | INTC Price Prediction) historic breakout came fast and from out of nowhere, as the chip laggard made massive leaps to win back many investors amid the AI revolution. With a competitive slate of chips and a foundry business that could help the tech world diversify away from the likes of Taiwan Semiconductor (NYSE:TSM), perhaps Intel isn’t done rallying, given its role in the AI race as well as the huge votes of confidence from the U.S. government and other leaders in the tech scene.
While the latest drawdown might be a concern for some, with Intel shares falling close to 10% in a single session on Tuesday, dragging the name into a bear market, questions linger about how much of the explosive past year’s gains will be given back.
As it stands today, Intel’s a $555 billion force again, but with a nasty technical backdrop (a double-top pattern may very well be in the works) and a lot of negative momentum behind the semiconductor trade in recent weeks, Intel isn’t a name without its fair share of risks.
Those who missed the latest “perfect storm” of positive headlines might have a chance to do some buying as the name falls hand-in-hand with many of the “pick and shovels” plays that have helped lift the broader Nasdaq 100 higher. Indeed, the industry outlook might be a bit more jittery, with valuations creeping higher and concerns over what could happen if the hyperscalers were to scale back a bit.
Meta Platforms‘ (NASDAQ:META) move into selling AI compute is hardly a sign that CapEx numbers for hyperscalers are going to move lower. What it does signal, though, is that the social-media giant might have more compute than it can put to use.
The semi sell-off is real. Intel might be the best name to buy on weakness
Add the decline of “tokenmaxxing” into the equation as well as the rise of “edge AI” as well as the generous credits extended to users of AI compute, and maybe it’s not a stretch to ring the register on some of the AI chip giants as the tables shift back to the spenders (the Mag Seven) and away from the semiconductors selling all those picks and shovels.
In a prior piece, I highlighted the likelihood that such a rotation would materialize. And after another brutal session for the semis while the Mag Seven held their own, it certainly seems like a rotation is playing out. Indeed, it will be exciting to see what kind of winners AI can mint at the application layer.
But, at the end of the day, Intel is the foundry and AI chip titan that investors cannot ignore. Even as software has its moment to shine, I certainly wouldn’t bet against Intel, especially as the firm enters its profitable growth phase after investing money in all the right places. Of course, perhaps the most overlooked reason to give Intel the benefit of the doubt lies within its new CEO, Lip-Bu Tan.
The man has earned the trust of investors, and with deals inked with giants such as Apple (NASDAQ:AAPL), I certainly wouldn’t hit the panic button just because the semiconductors are taking an overdue breather. As the foundry moves from bleeding cash to raking in considerable sums while we enter the 18A node era, there’s no shortage of things to look forward to when it comes to Intel.
The bottom line
The turnaround is in the books. Next comes the profitability push and a chance for the firm to widen its moat further. Arguably, that’s even more exciting now that the haze of uncertainty and existential fears has all been cleared up.
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