(JW Insights) Sep 11 -- US chip giant Intel is a perceived semi winner in U.S. if U.S.-China trade war intensifies, reported Morningstar on September 9, citing Mizuho analyst Jordan Klein.
Mizuho analyst Jordan Klein wondered why more investors aren't bullish on the stock given the chance a trade war between the U.S. and China could disrupt semiconductor "fab" operations in Asia, leaving Intel in a plum production position domestically.
Klein reasoned that Intel, while bruised and battered over the past few years, is still a $160-billion-market-cap stock that's not only up more than 40% year to date, but has outperformed Nvidia Corp.'s stock by more than 1,000 basis points over the past three weeks.
Intel "owning the biggest U.S. semi fab could be increasingly valuable," Klein said, also pointing out that at least one competitor, GlobalFoundries, rose 1.3% on September 7. On September 8, GlobalFoundries shares finished up 2.6%.
Like chip makers Texas Instruments and Micron Technology, Intel operates fabrication facilities known as "fabs" that etch designs of nanometer-sized transistors onto silicon disks that become finished semiconductors. Many chip makers, however, like AMD and Nvidia, as well as companies like Apple that design their own chips, are "fabless," meaning they rely on third-party fabs like Taiwan Semiconductor Manufacturing Co., SK Hynix Inc. and Samsung Electronics Co. to make the physical chips.
While TSMC has moved to open fabs in the U.S., the bulk of its facilities are in Taiwan region and China's mainland. As evidenced during the COVID pandemic and related China shutdowns, any disruption of the semiconductor supply chain in Asia can have far-reaching consequences for an industry that relies on chips. In fact, Intel recently moved into the third-party fab business with Intel Foundry Services, but the business arm has yet to name a high-profile customer.
Klein admitted that Intel's management and stock performance "still has a long road ahead to fully convince a highly skeptical [long-only] investor community, but I hear more and more hedge funds buying into this rally on view it's a safe place to hide into September. [third quarter] results," Klein said, especially as a "perceived 'domestic semi winner' if U.S.-China trade war intensifies," according to the Morningstar report.