It had been a great week for big tech and the stock market more broadly. Intel just had to be a party pooper, as the chip maker’s stock plunged nearly 12% Friday after releasing disappointing sales forecasts.
The company blamed a mix of factors, including seasonal declines in its core units along with an inventory pileup at auto-chip maker Mobileye. Intel’s selloff dragged down other chip makers, with Advanced Micro Devices, Nvidia and Micron Technology all edging lower.
To me, Intel has been analogous to a legacy auto company. A company with very high continuous capital investment, along with a big risk of more efficient competitors in an area that becomes commoditized rapidly. If your product becomes commoditized just as you’ve recaptured the massive capital investment, or worse before you’ve recaptured it, profits will be thin. Basically uninvestable from my point of view.
Since it’s difficult to determine who will win in those high capital/commoditized businesses, I also rarely invest in any of them, and thus I didn’t invest in Nvidia either.
Exactly! With such high capital investments it’s hard to compete in the stock market. Companies like ARM Holdings are successful because they farm out the making of the chips and even the specific use case designs (to customers).
That’s correct. Neither does AMD, Arm (as you mentioned), Qualcomm and a host of others. When it comes to bleeding edge fabs owned by chip design companies the only ones I am really aware of are Intel, IBM, and Samsung. (numerous companies own fabs for less advanced chips, think Texas Instruments, etc.). Note, TSMC does not design their own chips.
NVDA up about 1% so far today ( which isn’t much more than noise for tech companies, +/- 1% is nothing ).
I try not to pay attention to any of the analysts out there. Definitely do not base buy/sell based on quarter to quarter. My thought is if you think it’s a great business, own it. Be patient in buying it, as there is a lot of love/hate with tech, but I’m not convinced that following any analyst rec is good for your net worth. YMMV.
