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Rich Asplund

Why are Hedge Funds Dumping Intel?

Hedge funds have been selling shares of Intel (INTC) and buying up rivals, such as Nvidia (NVDA) and Advanced Micro Devices (AMD).  According to data from 13F filings, more shares of Intel were sold by funds than any other company besides Nokia Oyj.  Sentiment has recently soured on Intel as it implements its turnaround plans. Also, Tuesday’s termination of Intel’s $5.4 billion deal to acquire Tower Semiconductor Ltd (TSEM) could slow its plans toward becoming a top chipmaking foundry.

Late Tuesday, Intel said it was walking away from a February 2022 agreement to acquire Tower Semiconductor Ltd for $5.4 billion after it failed to win regulatory approval from China on time.  The attempted purchase of Tower Superconductor was a major push by Intel CEO Gelsinger’s plan to get into the foundry market, the faster-growing part of the semiconductor industry dominated by Taiwan Semiconductor Manufacturing Co.  Rising tensions between China and the U.S. have made securing approval for transactions that require agreement from regulators in China and the U.S. increasingly difficult, particularly those involving semiconductors.

Intel has struggled to insert itself into the artificial intelligence (AI) story, the subject of obsession for traders this year and currently dominated by Nvidia and Advanced Micro Devices.  According to 13F data, hedge funds boosted their positions in Nvidia by $11.4 billion in the second quarter, while Advanced Micro Devices saw a $1.5 billion increase.  However, funds cut their positions in Intel by half in Q2, with sellers outnumbering buyers two to one.

Shares of Intel rallied to a 1-year high late last month on signs of progress in its turnaround when it reported an unexpected profit in the second quarter and promised to show more evidence of its long-awaited comeback in the second half of this year. So far this quarter, shares of Intel are up +4%, the second-best performer in the Philadelphia Semiconductor Index ($SOX).  CEO Gelsinger said Intel is on course or slightly ahead of plans to adopt new manufacturing advances in its effort to regain its technological leadership by 2025.

Despite Intel’s recent gains, the stock still lags far behind other chipmakers that are ramping up their plans to dominate the AI market.  Some analysts are concerned that the longer Intel’s turnaround takes, the more inclined investors will be to look elsewhere.  According to Clearstead Advisors, “Intel is trying to come up with more competitive products, but that will take time.  In the meantime, there are better-positioned companies.”

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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