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Intel (IN TC) has cut costs and beaten back a push from AMD (AMD) to take some of the larger company’s share of x86 chips in PCs and servers. AMD’s stock is near a low and may never fully recover.

Part of the improvement in Intel’s fortunes has been the word from Wall St. analysts that orders for its chips have been brisk. All of this has pushed Intel’s shares up 25% over the last six months, a huge move for such a big company. The stock has not traded around its current $26 since early 2006.

But, the train may be about to come off the track. PC sales are not moving up rapidly but chip orders still are. That means that there is a very good chance the chip inventories at places like HP (HPQ) and Dell (DELL) are near historic highs. If so, future orders from Intel and AMD are likely to slow rapidly.

"Shipments of personal computers were flat in the second quarter, even as orders for the microprocessors that go into PCs were up 14%. That is the largest gap between shipments and sales in four years, according to Pacific Crest Securities. The trend seems to have persisted in the third quarter,: The Wall Street Journal writes.

Intel may be able to weather a slowdown and server sales may help overall orders, but virtualization software should start cutting into the need for more servers.

AMD may not be able to take a sharp downturn in orders. For that company, a high inventory environment at customers could break the back of an already troubled company.

Douglas A. McIntyre