What Happened?
Shares of computer processor maker Intel (NASDAQ: INTC) jumped 3.8% in the afternoon session after reports surfaced that the company was in early talks with its competitor, Advanced Micro Devices (AMD), about a potential deal to manufacture chips for them.
The potential deal was viewed as a major vote of confidence in Intel's push to build its foundry business, which makes chips for other companies. A partnership would be significant because AMD, a fierce competitor, has historically relied on Taiwan's TSMC for manufacturing its chips. For Intel, securing its main rival as a customer would validate its manufacturing technology and its ambition to compete with global foundry leaders. For AMD, the arrangement could provide a US-based production alternative and increase its bargaining power with other suppliers.
After the initial pop the shares cooled down to $37.33, up 3.9% from previous close.
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What Is The Market Telling Us
Intel’s shares are extremely volatile and have had 36 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock dropped 3.1% as an analyst note from Deutsche Bank tempered investor enthusiasm, leading to some profit-taking.
The bank reiterated a "hold" rating on the stock. While it raised its price target to $30 from a previous $23, the new target remained below the level where the shares were trading. The cautious view gave investors a reason to sell and lock in gains, especially after the stock had a strong rally through September. The move also came as the broader market showed weakness amid concerns over a potential government shutdown.
Intel is up 84.6% since the beginning of the year, and at $37.33 per share, has set a new 52-week high. Investors who bought $1,000 worth of Intel’s shares 5 years ago would now be looking at an investment worth $731.86.
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