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Intel stock was sliding after its foundry-business update on Wednesday.
David Becker/Getty Images
Chip maker
Intel
offered positive news on its foundry business Wednesday as it continues to build out new facilities to expand the custom chip-making service. Investors sold the stock anyway.
Intel’s (ticker: INTC) Foundry Services, officially created late last year, is a capital-intensive chip manufacturing business that is competing against
Taiwan Semiconductor Manufacturing
Company (TSM) and Samsung Electronics (005930. Korea). The company has made recent billion-dollar investments to build a semiconductor assembly and test facility in Poland, two factories in Germany, and another in Israel.
The question has been when Intel would reap the benefits of these investments. Chief Financial Officer David Zinsner updated investors at a Wednesday morning webinar saying the third-party chip manufacturing business will play a significant role in reducing costs by $3 billion in 2023. The company also expects to be the second-largest foundry next year, generating manufacturing revenue of more than $20 billion.
Intel on Wednesday also announced an agreement to sell a minority stake in IMS Nanofabrication business, an Austria-based technology provider that supports semiconductor creation.
The stock, nonetheless, fell 6% to $$32.90 on Wednesday. The S&P 500 lost 0.5% while the Nasdaq Composite was down 1.2%
Pin the blame on the broader market. Intel was’t the only chip maker stock getting hit on Wednesday.
Advanced Micro Devices
(AMD) was down by 5.7% while
Nvidia
‘s (NVDA) and
Qualcomm
(QCOMM) stocks were off by 1.7% and 3.4%, respectively. The
PHLX Semiconductor Index
(SOX) fell 2.7%.
The selloff comes after major gains by the semiconductor companies this year. Nvidia, specifically, has run up nearly 200% this year and trades at a valuation of 52.3 times the per-share earnings expected over the next 12 months, compared with its five-year average of 39.4 times. Even after Wednesday’s slide, Intel is up 24% this year.
Investors could be selling to lock in profits, or in response to word from Federal Reserve ChairJerome Powell that more increases to interest rates are on the way, which would be bad news for growth stocks. ‘“Given how far we’ve come, it may make sense to move rates higher but to do so at a more moderate pace,” Powell told lawmakers on Wednesday. “That’s really it.”
Write to Karishma Vanjani at [email protected].
Source: https://www.barrons.com/articles/intel-stock-price-foundry-event-today-5ea04754?siteid=yhoof2&yptr=yahoo