In a trading day that saw most semiconductor stocks get crushed, Intel still posted gains.
Intel (INTC 1.19%) stock gained ground in Thursday’s trading despite big sell-offs hitting the broader tech sector. The semiconductor company’s share price closed out the daily session up 1.2%, according to data from S&P Global Market Intelligence. Earlier in the day’s session, it had been up as much as 5.3%.
Chip stocks broadly got crushed in today’s trading. In fact, the performance marked the worst single-day valuation slide for the industry in more than four years. But despite the big semiconductor sell-off, Intel was able to post gains thanks to the promise of the company’s expanding chip fabrication business.
Why most semiconductor stocks got crushed today
Semiconductor investors have gotten hit by a surge of concerning news lately. Bloomberg reported yesterday that former president and current presidential candidate Donald Trump had made comments suggesting that the U.S. could be hesitant to defend Taiwan or require it to pay for services if he were to become Commander-in-Chief again. Taiwan is home to Taiwan Semiconductor Manufacturing, the world’s leading contract semiconductor fabrication company and the leading manufacturer of advanced chips used for artificial intelligence (AI), accelerated computing, and other vital national security and economic applications.
Along similar lines, Bloomberg also reported yesterday that the Biden administration was weighing the implementation of much stronger export restrictions for chip and semiconductor equipment manufacturing companies dealing with the Chinese market. Measures are already in place to prevent Nvidia, AMD, Intel, and other companies from exporting their most advanced chips and processors to China, but the new measure currently being considered would allow the U.S. to implement much more far-reaching restrictions. If adopted, the foreign direct product rule would allow for restrictions to be put on products manufactured in other countries if they used any U.S.-derived technology.
Why Intel stock bucked the trend
With the tense geopolitical situation between China and Taiwan raising questions about chip availability in the future, the U.S. and other Western allies have been making moves to ramp up domestic fabrication capabilities. These countries have been pouring billions of stimulus dollars into improving their ability to manufacture chips, and Intel has already been a major recipient of funding. There’s a good chance that more capital support from the public sector is on the way, and geopolitical risk factors could accelerate the growth of Intel’s fab business.
Intel currently ranks as the world’s third-largest chip fabrication company, trailing behind only TSMC and Samsung. But the company is placing a much bigger emphasis on providing third-party fab services, and it expects that it will become the second-biggest player in the space by 2030.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.