Shares of Intel (NASDAQ:INTC) saw an unexpected rise of 3.2% on Thursday, despite a broad sell-off in most semiconductor stocks due to escalating U.S.-China tensions. This follows reports from Wednesday that China may ban government agencies from using iPhones, triggering a sell-off not only in Apple (NASDAQ:NASDAQ:AAPL) but also among its suppliers and other semiconductor equipment stocks.
While some analysts have termed these worries as "overblown", Intel has historically seen gains during such periods of U.S.-China tension. Despite having China exposure through its PC and data center processors, Intel is building out a U.S.-based foundry ecosystem it hopes will rival Taiwan Semiconductor Manufacturing (NYSE:TSM). There is speculation that Intel could significantly benefit if chip designers pivot to Intel's foundries in the event of a destabilizing situation in Taiwan.
In addition to this, Intel received positive analyst commentary on the very day regarding its emerging foundry ecosystem. At an industry conference at the end of August, Intel CEO Pat Gelsinger announced that the company had received a large pre-payment for its foundry ecosystem. Specifically, the pre-payment was for 18A, the leading-edge 1.8nm fab Intel plans on bringing online at the end of 2024. This fab is expected to produce chips that will regain process-node parity with, or even leadership over, TSMC.
Citi analyst Christopher Danely noted on Thursday that the pre-payment likely came from a "whale", referring to an extremely large chipmaker that is likely a leader in its market. This could be seen as a promising vote of confidence in Intel's fledgling foundry and could play a key role in its turnaround.
Leading chip designers such as Apple and Nvidia (NASDAQ:NASDAQ:NVDA) would probably like an alternative foundry partner to manufacture their chips other than TSMC, which has increased prices over the past few years due to its leadership position. Moreover, Intel could especially benefit if customers become nervous about U.S.-China relations, which could potentially lead to an attempted invasion of Taiwan.
Gelsinger also noted that Intel's current quarter was tracking above the mid-point of guidance, indicating a potential bottom in the PC market. Intel's roadmap to catch up to TSMC appears on track, and there is growing interest in Intel's Max and Gaudi AI accelerators, which have the potential to carve out some share of the booming AI market.
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