chip maker
offered positive news about its foundry business on Wednesday as it continues to build new facilities to expand its custom chip manufacturing service. Investors sold the shares anyway.
Intel Foundry Services (ticker: INTC), officially launched late last year, is a capital-intensive chip manufacturing company that competes against
Taiwan Semiconductor Manufacturing
Company (TSM) and Samsung Electronics (005930. Korea). The company has made recent multi-billion dollar investments to build a semiconductor assembly and test installation in Poland, two factories in Germanyand another in israel.
The question has been when Intel will reap the benefits of these investments. Chief Financial Officer David Zinsner updated investors in a webinar Wednesday morning saying the third-party chip manufacturing business will play a significant role in reducing costs by $3 billion by 2023. The company also expects to be the second largest foundry next year, generating manufacturing revenue of more than $20 billion.
Intel also announced on Wednesday a agreement to sell a minority stake in the IMS Nanofabrication business, an Austria-based technology provider that supports the creation of semiconductors.
However, the shares fell 6% to $32.90 on Wednesday. He S&P 500 lost 0.5% while the Nasdaq Composite down 1.2%
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Blame the market in general. Intel wasn’t the only chipmaker to be affected on Wednesday.
(AMD) declined 5.7%, while
(NVDA) and
(QCOMM) shares fell 1.7% and 3.4%, respectively. He
(SOX) fell 2.7%.
The selloff comes after significant gains for semiconductor companies this year. Nvidia, specifically, is up nearly 200% this year and is trading at a valuation of 52.3 times expected earnings per share over the next 12 months, compared with its five-year average of 39.4 times. Even after Wednesday’s dip, Intel is up 24% this year.
Investors could be selling to lock in earnings, or in response to words from Federal Reserve Chairman Jerome Powell that more interest rate hikes are on the way, which would be bad news for growth stocks. “Given how far we’ve come, it may make sense to raise rates, but do it at a more moderate pace,” Powell said. legislators on Wednesday. “That’s really it.”
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Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
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