Concerned about an AI bubble? Sign up for The Daily Upside for smart and actionable market news, built for investors.
Intel is seeking Repentium, and with its stock up 228% this year, markets appear more than willing to grant absolution for the money-losing ways of its semiconductor manufacturing unit.
The California tech giant’s shares popped 3.5% on Wednesday despite the broader market’s allergic reaction to Federal Reserve officials raising the prospect of an interest rate hike. While the S&P 500 sank 1.2% and the Nasdaq Composite dropped 1.3%, Intel was floating on new promise for its foundry.
Sign up for The Daily Upside at no cost for premium analysis on all your favorite stocks.
READ ALSO: Accenture Plummets as Forecast Highlights Pressure on Consultants and Apple Joins the High-Tech Price-Hike Club
Three’s Company
There are only three major chipmakers capable of mass-producing the most advanced semiconductors: Taiwan Semiconductor Manufacturing Co. (TSMC), South Korea’s Samsung and Santa Clara, Calif.-based Intel. TSMC is the undisputed leader among them, boasting a 70% share of the global foundry market and world-class customers such as AMD, Apple, Broadcom and Nvidia.
Intel, meanwhile, mostly manufactures chips for in-house use. But running a specialized factory to make semiconductors is expensive: Intel’s foundry unit, which posted an operating loss of $2.4 billion on $5.4 billion in sales during the first quarter, has been generously described as a “loss leader.” In the golden age of chips, that’s not optimal. Intel is working to change it, with both internal and external incentives.
South Korea’s Chosun reported in March that TSMC’s advanced manufacturing capacity is almost fully booked through 2028, with the trillions in expected capital spending on AI over the next few years leaving it unable to keep up with demand. That puts Samsung and Intel in a position to woo customers. Intel upped the ante Tuesday when it began “risk production” with its 18A-P manufacturing process, which the company…
..
