Intel's Issues Go Beyond AI. This Is the Problem.
Rather than playing catch-up, here's what the chipmaker needs to do to reinvent itself. Plus, after Thursday's selloff, my focus is on a sector on the verge of breaking out.
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Wednesday’s post-Fed rally was short-lived. Thursday produced yet another mini-tech wreck day, and Intel’s INTC disaster after the bell, combined with disappointing reactions to Amazon AMZN and Bookings Holdings BKNG, won’t help much Friday.
That being said, Apple AAPL found its way to green last night, and given its size, a rally in the stock could lift the Nasdaq all by itself, but it will need a reversal from Amazon to happen. If Amazon ends the day down 5% or more, what Apple does likely won’t matter enough.
Intel’s problem stems beyond playing catch-up in the AI space. It’s a material problem. Intel needs to reinvent itself and move beyond silicon sooner rather than later. Rather than playing catch-up, it needs to outright leap over other chipsets. Cutting the dividend, reducing its labor force, and shifting those savings toward R&D, radical R&D even, is a good start, but Intel needs to reinvent itself at the core.
Playing catch-up in the AI space for Intel means altering its core beyond silicon because it won’t win in a competition using only architecture or design. The internal foundry model should work as a great start to improve operations. Still, Intel should be on the prowl for small acquisitions that it can scale quickly, especially in the material science space. A traditional CPU simply cannot compete with a GPU right now.
Real estate and Treasuries managed to survive Thursday relatively unscathed, but financials and small-caps, the other two strong performers of the past few months I’ve been keen on, did not hold up. Neither is broken, but both could benefit from a small rally Friday and a steady week next week. If not, a shift to healthcare as a focus may be needed.
A focus on healthcare looks warranted, given the Health Care Select Sector SPDR ETF XLV is on the verge of breaking out. The range has been tight, but not particularly wide, so my upside expectations here are modest which is why it has remained outside my prime watchlist. That may change next week. We shall see.
At the time of publication, Byrne had no positions in any securities mentioned.
