ADVERTISEMENT

What Led To Intel’s Outperformance Vs. Nasdaq Peers?

Nvidia Corp., Advanced Micro Devices Inc. and Broadcom Inc. fell on Wednesday. But Intel was an outlier. Here's why.

Intel chipset on a motherboard. 
Intel chipset on a motherboard. 
Show Quick Read
Summary is AI Generated. Newsroom Reviewed

Intel Corp.’s performance was one of the rare bright spots in an otherwise dire Wednesday trading session for tech-heavy Nasdaq, with shares of the U.S. chipmaking company rising as much as 8%.

The tech index witnessed a bloodbath on Wednesday, tumbling almost 3% to endure its worst trading session in more than 18 months.

Losses were led by semiconductor giant Nvidia Corp., which fell 6.64%. Its domestic competitor, Advanced Micro Devices Inc., fell over 10%, while Broadcom Inc. tumbled almost 8%.

Swooning losses for the chip stocks came on the back of a Bloomberg report signalling further pushback from the Biden administration over trade restrictions on China.

With global markets being highly sensitive to semiconductor supply chain disruptions, Taiwan-listed Taiwan Semiconductor Manufacturing Co. closed 2.4% lower on Wednesday, while Dutch company ASML’s U.S.-listed shares also tumbled.

In the midst of the semiconductor industry cracking in the face of potential trade restrictions on China, Intel was a welcome outperformer.

What’s Driving Optimism On Intel?

While the majority of mega-cap tech companies, including Nvidia, rely heavily on foreign manufacturing of its semiconductors, Intel’s position as a domestic manufacturer of chips meant the stock was an outlier on Wednesday’s bloodbath.

In fact, Intel has re-positioned itself as a leader in the industry following the return of Pat Gelsinger as the company’s CEO in 2021.

Since taking over, Gelsinger has made sweeping changes in the company, including a narrowed focus on chip design and domestic manufacturing.

Gelsinger’s new IDM 2.0 strategy has seen Intel focus heavily on the massive build-out of new fabs in the United States and Europe, which was seen as a pivot to traditional chip manufacturing hotbeds such as Taiwan and China.

At the moment, Intel runs two prominent fabs in the U.S.—Arizona and Oregon. As part of the strategy, the company invested $20 billion in the Arizona plant in 2021, vowing to create thousands of high-tech jobs in the surrounding area.

As per a recent update, Intel is spending over $32 billion to build two more high-tech chip facilities in the U.S. while enhancing capacity in Arizona.

Thanks to a renewed focus on domestic manufacturing, Intel was also able to reap the rewards of the Biden Administration’s Chips Act, which reportedly awarded the company an $8.5 billion grant.

Gelsinger’s expensive foray was backed by Intel’s cost-cutting measures and exit from several past businesses.

What’s Next for Intel?

With the U.S. presidential election around the corner, prospects for Intel could be impacted by the possibility of Donald Trump’s return to office.

However, given Trump’s strong stance on China and the U.S.'s escalating tension with the Asian powerhouse in recent years, policy continuity when it comes to stress on domestic chip manufacturing hasn't been ruled out.

Intel remains steadfast in its goal to drive domestic chip manufacturing capacity, which in turn has boosted the company’s certain businesses, including the contract chip manufacturing segment.

Under the leadership of Gelsinger, Intel has also launched its own range of high-end Graphics Processor Units (GPUs) in the form of the ARC Series, which aims to compete with Nvidia and AMD in the gaming segment.

All eyes will now be on Intel’s Q2 earnings as the company looks to grapple with market conditions and uncertainty in the global chip supply chain. 

OUR NEWSLETTERS
By signing up you agree to the Terms & Conditions of NDTV Profit