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This pullback is an early Christmas gift from Mr. Market – don’t miss it

After forming its November highs, Intel Corporation stock has pulled back significantly ahead of its Semiconductor ETF (SOXX) peers. However, even before Intel CFO David Zinsner highlighted in an early December conference that the company’s “visibility isn’t pristine” going into Q1’23, we believe investors still on board should be keenly aware of its multi-year investment roadmap.

Hence, we don’t think investors expect CEO Pat Gelsinger and his team to be posting solid H1’23 results as macroeconomic concerns continue to beset its downstream customers. Also, despite its data center leadership, Intel is projected to lose more share against AMD (AMD) and Arm-based competitors moving forward.

It also expects Intel and AMD to benefit from replacement demand in 2023/24 as they push out their next-gen platforms. However, it also cautioned that Arm-based processors could continue to gain share against x86 moving ahead, with AMD continuing to take share within the x86 space.

After forming its November highs, Intel Corporation stock has pulled back significantly ahead of its Semiconductor ETF (SOXX) peers. However, even before Intel CFO David Zinsner highlighted in an early December conference that the company’s “visibility isn’t pristine” going into Q1’23, we believe investors still on board should be keenly aware of its multi-year investment roadmap.

Hence, we don’t think investors expect CEO Pat Gelsinger and his team to be posting solid H1’23 results as macroeconomic concerns continue to beset its downstream customers. Also, despite its data center leadership, Intel is projected to lose more share against AMD (AMD) and Arm-based competitors moving forward.

Accordingly, to report estimates suggest that cloud computing would likely continue to drive server demand in 2023, despite the downturn in consumer electronics.

It also expects Intel and AMD to benefit from replacement demand in 2023/24 as they push out their next-gen platforms. However, it also cautioned that Arm-based processors could continue to gain share against x86 moving ahead, with AMD continuing to take share within the x86 space.

Hence, it’s clear the company has staked the recovery of its market leadership through the success of Intel Foundry Services (IFS), as it competes with TSMC (TSM) and Samsung.

However, the recent resignation of IFS leader Randhir Thakur (slated to remain in Intel through Q1’23) likely didn’t inspire confidence as TSMC amped up its CapEx investments in Arizona. While TSMC’s Arizona fabs are not intended to be the most advanced process technology when completed, the company remains well-placed to compete for manufacturing capacity with Intel.

Notably, with AMD, Nvidia (NVDA), and Apple (AAPL) signing up as TSMC’s first customers in Arizona, Intel would likely to face serious competition as it looks to convince customers that it’s ready to take on TSMC in the US.

And to make things even more challenging for Intel, Samsung also plans to overtake TSMC in 2024, as DIGITIMES reported that the Korean semi leader “is preparing a ‘master plan’ for its foundry business to turn the tables against TSMC in 2024, utilizing its 3nm process to take back orders from major US clients like Qualcomm and Nvidia.”

Notably, the ‘master plan’ encompasses activating its Taylor plant in the US, leveraging the technological reshoring priorities of its fabless customers and “recreate the ‘dual-track’ strategy from 8 years ago and lure main clients back to Samsung.”

Therefore, we believe investors want to see more commitments from Intel’s “potential” customers beyond MediaTek. But, these potential customers need to have high confidence that the company is on top of its IFS recovery and can deliver the performance and yields that TSMC is leading. As seen in Qualcomm’s (QCOM) stumbles with Samsung, credibility once lost, is difficult to recover.

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