The morning news cycle has been tough on the semiconductor stocks.
NVIDIA (NVDA), Taiwan Semiconductor (TSM), and others are trading lower by more than 5% as investors are selling chip stocks in reaction to President Biden and Former President Trump’s overnight comments.
But there’s one chip company that’s rising to the occasion, a “silver lining” among the semi stocks.
Shares of Intel are trading more than 5% higher in response to the morning headlines. This makes Intel (INTC) one of only two semiconductor stocks trading higher for the day.
This morning’s news shows that the semiconductor industry is likely to face new geopolitical challenges. Tariffs, restrictions and most importantly, threats to more than 60% of the world’s semiconductor manufacturing capability.
Recent comments by former President Donald Trump criticizing Taiwan's dominance in the semiconductor sector underscore the precarious nature of relying too heavily on foreign chip production.
This spotlight on geopolitical risks reinforces the value of investing in a robust domestic player like Intel.
Intel, with its extensive manufacturing capabilities within the United States, stands to benefit from any potential shifts in policy that favor domestic production over imports.
As tensions mount and the U.S. government possibly reevaluates its trade and security strategies, companies like Intel could see increased support from the government and demand for their products.
Intel's strategic positioning is bolstered by the CHIPS Act, a U.S. government initiative aimed at revitalizing America's semiconductor industry.
Intel is benefiting significantly from this act, having been earmarked to receive substantial funding to support its expansion and innovation efforts.
The CHIPS Act not only underscores the government’s commitment to domestic manufacturing but also puts Intel at the forefront of the U.S.'s efforts to secure its semiconductor supply chain amidst global uncertainties.
Beyond helping to secure the nation’s semiconductor manufacturing, Intel is also hard at work on their next generation AI chips.
In June, Intel unveiled new AI chips as it seeks to reclaim market share from Nvidia and AMD. The new chips represent the “commoditization” of the AI chip market as more competitors enter to take on NVIDIA for market share.
The same phenomenon happened in the early 2000s when companies like AMD and Texas Instruments caught up with Intel’s dominant chip technologies, which at that time were like NVIDIA’s current hold on the AI chip market.
While taking a long time to happen, Intel is still positioned to move back into the chip market as the market share giant that it once was.
After seven consecutive quarters of year-over-year declining revenue, the company has posted stronger revenue growth in the last two quarters along with earnings per share that continue to beat Wall Street expectations.
Wall Street expectations for the stock remain low as most analysts covering the stock recommend it as a “hold”, not “buy”.
That trend is changing, slightly, as analyst have started upgrading the stock since the company’s guidance in May.
From a technical perspective, Intel shares appear to have formed a long-term foundational price bottom at $30.
Shares of Intel have spent the last three months trading at or around $30. While the stock has lagged the rest of the market during this period, the support for shares at $30 has continued to grow stronger.
Intel heads into its next earnings report on August 1 with a technical picture that is strengthening.
The stock’s 50-day moving average shifted into a bullish trend last week. This signals that the stock has a 66% chance of closing higher each day while that trend is in place.
Shares are likely to see resistance as they approach the $40 level from that round-numbered price resistance and the stock’s 200-day moving average.
From a long-term perspective, Intel is trading back above its long-term 20-month moving average, putting it in a long-term bull market trend. That trendline sits at $35, which should be a site of support for the stock.
Watch for analyst upgrades and more geopolitical pressures to act as a catalyst for Intel shares with a price Target of $50.
