Core Viewpoint - Intel is planning significant layoffs and cost-cutting measures under new CEO Lip-Bu Tan, focusing on both manufacturing and marketing divisions to improve efficiency and profitability [1][8][12] Group 1: Layoffs and Workforce Changes - Intel is expected to lay off a substantial number of employees, potentially up to 20,000, which could represent 15% to 20% of its workforce [8][10] - The company previously laid off around 15% of its workforce in August, indicating a trend towards reducing headcount to streamline operations [8] - The layoffs will also affect factory workers responsible for manufacturing chips for both Intel and third-party customers [10] Group 2: Marketing Strategy and Outsourcing - Intel plans to outsource many marketing jobs to Accenture, utilizing AI technology to enhance marketing efficiency and customer experience [2][3] - The company spent $856 million on advertising in 2024, down from $950 million in 2023 and $1.2 billion in 2022, indicating a trend towards reducing marketing expenses [5] - Outsourcing marketing operations could potentially save Intel hundreds of millions of dollars, which is critical as the company seeks to return to growth and profitability [6][12] Group 3: Financial Performance and Goals - Intel's gross margin fell to 32.7% in 2024, down nearly 10 percentage points from 2022, highlighting the need for cost efficiencies [11] - The company generated $53 billion in revenue last year, and while cost-cutting may not seem significant relative to revenue, every reduction is crucial for its turnaround strategy [6] - The focus on improving gross margin and reducing operating expenses is essential as demand for Intel's products has decreased significantly in recent years [12]

In the battle of Silicon Valley titans, Nvidia Corp NVDA is leaving Intel Corp INTC in the dust – on both the income statement and the stock chart. Despite generating almost four times as much revenue as Intel on an annualized basis, as Beth Kindig, the lead tech analyst at I/O Fund, noted on X, Nvidia trades at less than half Intel's forward price-to-earnings ratio. If that sounds backwards, you're not alone.For its last reported quarter, Nvidia grossed $44 billion in revenues. This, compared to Intel’s la ...

Core Insights - Intel Corporation and NVIDIA Corporation are leading semiconductor companies focusing on AI and advanced chip technologies [1][2] - Intel is shifting from a PC-centric business model to data-centric sectors, while NVIDIA is expanding its AI platforms across various industries [3][7] Intel Overview - Intel is investing in manufacturing capacity to support its IDM 2.0 strategy and enhance its position in the AI sector [4] - The Xeon 6 processors are designed to handle large AI workloads, providing industry-leading capabilities at a lower total cost of ownership [4][5] - Intel's 5N4Y program aims to regain leadership in transistor and power performance by 2025, with Xeon platforms setting benchmarks in 5G cloud-native core [5] - However, Intel faces challenges due to significant revenue dependence on China amid tightening export restrictions and increased competition from domestic chipmakers [6] NVIDIA Overview - NVIDIA is a leader in visual computing technologies, with a strong focus on AI-based solutions for high-performance computing, gaming, and virtual reality [2] - The company's DGX Cloud AI infrastructure is gaining traction among enterprises for training and deploying AI models at scale [7] - NVIDIA's upcoming Blackwell GPUs are expected to enhance AI inference capabilities significantly, further solidifying its market position [9] - Despite its strengths, NVIDIA's reliance on Taiwan Semiconductor Manufacturing Company for GPU production poses supply chain risks amid geopolitical tensions [10] Financial Performance and Projections - Intel's 2025 sales are projected to decline by 4.3%, while its EPS is expected to grow by 323.1% [11] - In contrast, NVIDIA's 2025 sales are estimated to grow by 51.4%, with EPS rising by 42.1% [12] - Over the past year, Intel's stock has declined by 31.1%, while NVIDIA has gained 21.8% [14] - Intel's price/sales ratio is significantly lower at 1.78 compared to NVIDIA's 16.17, making Intel appear more attractive from a valuation standpoint [15] Long-term Growth Expectations - NVIDIA has a healthy long-term earnings growth expectation of 28.2%, compared to Intel's 10.5% [18] - Both companies anticipate earnings improvement in 2025, but NVIDIA is positioned better for revenue growth [18]

Asia Memory Equities Memory prices continue to hover higher Korea Soaring memory prices: We reiterate our positive view on the memory sector. Previously, we highlighted a faster memory turnaround from April (see: Asia Memory report, 10 March). We now see that memory prices are hovering higher throughout 2Q, with a higher level of blended ASPs of +3-8% q-o-q due to 1) earlier phase-out of DDR4 products leading to aggressive purchases on the fear of shortages while solid demand for DDR4 is supported by the le ...

Company Performance - Intel's stock closed at $21.08, reflecting a -1.91% change from the previous day, underperforming the S&P 500's daily loss of 0.22% [1] - Over the past month, Intel's stock has increased by 4.57%, outperforming the Computer and Technology sector's gain of 2.98% and the S&P 500's gain of 0.45% [1] - The upcoming earnings report is anticipated to show an EPS of $0.01, a 50% decrease from the same quarter last year, with expected revenue of $11.87 billion, down 7.53% year-over-year [1][2] Fiscal Year Estimates - For the entire fiscal year, the Zacks Consensus Estimates predict earnings of $0.29 per share and revenue of $50.8 billion, indicating changes of +323.08% and -4.33% from the previous year, respectively [2] Analyst Estimates and Stock Performance - Recent changes to analyst estimates for Intel are crucial as they reflect short-term business dynamics, with positive revisions indicating a favorable business outlook [2][3] - The Zacks Rank system, which incorporates estimate changes, has a strong track record, with 1 stocks averaging an annual return of +25% since 1988 [4] Valuation Metrics - Intel is currently trading at a Forward P/E ratio of 73.31, significantly higher than the industry average of 35.75, suggesting a premium valuation [5] - The company has a PEG ratio of 7, compared to the Semiconductor - General industry's average PEG ratio of 2.52, indicating a higher valuation relative to expected earnings growth [6] Industry Context - The Semiconductor - General industry, part of the Computer and Technology sector, has a Zacks Industry Rank of 164, placing it in the bottom 34% of over 250 industries [7] - The top 50% rated industries outperform the bottom half by a factor of 2 to 1, highlighting the importance of industry strength in stock performance [7]

Core Viewpoint - Intel Corporation is experiencing a shift in market sentiment, moving from volatility to cautious optimism, driven by strategic announcements and a new aggressive phase under CEO Lip-Bu Tan [1][2][11] Group 1: Market Performance - Intel's stock reached an intraday high of $21.58 on June 18, closing at $21.49, marking a gain of over 3% for the day [1] - The stock's recent performance contrasts with the previous week's volatility, indicating a potential change in investor sentiment [1] Group 2: Strategic Developments - Intel has launched its Gaudi 3 AI accelerator kit, priced at approximately $125,000, significantly lower than competitors like NVIDIA, positioning it as a disruptive force in the AI market [3][4] - This pricing strategy is expected to catalyze revenue growth in the Data Center and AI segment, appealing to corporations concerned about AI computing costs [4][5] Group 3: Internal Restructuring - Intel is undergoing a comprehensive internal restructuring to enhance innovation and efficiency, including streamlining its business portfolio and a talent overhaul [7][9] - The company is reportedly in discussions to sell its Networking and Edge (NEX) business unit, potentially valued between $10 billion to $12 billion, which would provide a financial boost [8] - Recent hiring of senior engineering leaders from competitors reflects a commitment to rebuilding an engineering-first culture, while plans for workforce reductions of up to 20% indicate a focus on cost management [9] Group 4: Execution and Future Outlook - The recent actions on product pricing, talent acquisition, and portfolio management signal a shift from planning to execution, providing tangible evidence of Intel's strategy [10][11] - The coordinated moves are expected to reduce perceived execution risks, leading to a rational market response and a higher probability of a successful turnaround [11]

Group 1: Intel's Strategic Shift - Intel is committed to becoming a global foundry leader, investing over $90 billion in capital expenditures to expand its foundry operations and compete with TSMC and Samsung [2] - The foundry segment faced losses of nearly $13 billion last year, and Intel's shares have decreased by nearly 50% since their peak in 2024 [2] Group 2: Technological Advancements - Intel's new 18A process utilizes 1.8nm technology, currently in risk production, with initial batches being tested for manufacturing enhancements [4] - Innovations like RibbonFET gate-all-around transistors and PowerVia backside power delivery are expected to improve performance and energy efficiency, particularly for AI applications [4] Group 3: Competitive Landscape - TSMC holds over two-thirds of the foundry market and is expected to lead the 2nm generation, with mass production starting in late 2025 [5] - TSMC's 2nm process promises a 10% to 15% performance enhancement and up to 30% reduction in power usage compared to its 3nm node, with current yields at 60% [5][6] - Intel's yield rates for the 18A process are reported to be between 20% to 30%, while Samsung achieves 40% yields on its competing technology [5] Group 4: Market Dynamics - TSMC has a loyal customer base, including major clients like Apple and AMD, while Intel is diversifying its strategy by engaging TSMC for some upcoming processors [6] - Despite Intel's claims of improved performance with the 18A process, TSMC's chips are likely to maintain advantages in density and cost [7] Group 5: Stock Performance - Intel's stock has shown significant volatility, with annual returns of 6% in 2021, -47% in 2022, 95% in 2023, and -60% in 2024, contrasting with the more stable performance of the Trefis High Quality Portfolio [8]

Core Insights - Intel has significantly reduced its dividend in 2023 and completely suspended it in 2024 due to ongoing financial struggles and poor performance [1][2] - The company is undergoing a leadership change and cost-cutting measures, but a return of the dividend is not expected in the near future [2][14] Financial Performance - Intel has invested heavily in new manufacturing facilities and technologies to regain its competitive edge against TSMC, which has led to a cash-intensive process with minimal initial revenue from its foundry business [4] - The client computing business has suffered from a downturn in PC demand and competition from AMD, while the data center segment has also faced challenges due to strong competition and a shift towards AI spending [5] - As of the first quarter of 2025, Intel had approximately $21 billion in cash and short-term investments but over $50 billion in debt, which has been increasing for the past 15 years [6][8] Profitability and Cash Flow - The products business remains profitable, generating an operating income of $2.9 billion on $11.7 billion in revenue in the first quarter [9] - The foundry business, however, reported an operating loss of $2.3 billion with less than $1 billion in revenue, contributing to a total operating loss of $301 million for the quarter [10] - Capital expenditures have significantly outpaced depreciation, leading to an adjusted free-cash-flow loss of approximately $3.7 billion in the first quarter [11] Strategic Moves - Intel is divesting non-core businesses and has reduced its gross capital spending target for 2025 by $2 billion to $18 billion, which may help improve its financial situation [12] - Under new CEO Lip-Bu Tan, the company is focusing on cost reduction, management restructuring, and enhancing engineering capabilities to attract major foundry customers [13] Future Outlook - A potential turnaround for Intel could begin to take shape in 2026, but the dividend is unlikely to return until the company stabilizes and grows its CPU market share and external foundry revenue [14][15] - Improving the balance sheet and reducing debt will be prioritized before any consideration of restarting dividend payments [15]

Investment Rating - The report rates TSMC as a "Top Pick" with an "Overweight" rating [4][67]. Core Insights - TSMC is expected to increase global wafer prices by 3-5% on average in 2026, driven by strong AI demand, which may offset the negative impact of foreign exchange fluctuations [1][32]. - The stock has risen 31% over the past three months, but concerns remain regarding its underperformance compared to NVIDIA, which has increased by 53% in the same period [1][23]. - The report anticipates a 20% year-over-year revenue growth in 2026, with capital expenditures remaining flat at US$40 billion [2][50]. Summary by Sections Investment Outlook - TSMC's price target remains NT$1,288, indicating a 25% upside from the current price of NT$1,030 [4][67]. - The expected EPS for 2026 is NT$64.61, with a P/E ratio projected at 15.9 [4][67]. Financial Performance - TSMC's gross margin is expected to be between 55-56% in 2025 due to the impact of TWD appreciation, which affects margins by 40 basis points for every 1% change [2][25]. - The report revises the EPS estimates for 2025 and 2026 down by 6% and 12%, respectively, due to foreign exchange impacts [2][28]. Market Dynamics - The demand for TSMC's 2nm node is projected to be strong, with capacity expected to reach 90kwpm by the end of 2026 [53][59]. - AI revenue is anticipated to grow at a mid-40% CAGR, contributing approximately 34% of TSMC's total revenue by 2027 [41][50]. Strategic Developments - TSMC is expected to benefit from Intel's outsourcing of CPU production, which could account for 33% of Intel's COGS by 2025 [64][66]. - The company is also positioned to capture demand from the Chinese AI market, contingent on regulatory approvals for shipping AI GPUs [41][50].

Core Viewpoint - AI stocks are gaining attention on Wall Street, with rising valuations, but there are still undervalued opportunities in the tech sector, particularly in companies that align with value investing principles [1][2]. Group 1: Alphabet - Alphabet is a leader in AI, having prioritized it for over eight years and made significant advancements, including the acquisition of DeepMind and the launch of Google Gemini [4][5]. - The stock is currently trading at a price-to-earnings ratio of 20, which is over 20% lower than the S&P 500, indicating an attractive valuation [5]. - Despite regulatory pressures and competition from generative AI chatbots, Alphabet has maintained steady growth, with Google Cloud becoming profitable and overall competitive advantages intact [6][9]. Group 2: TSMC - Taiwan Semiconductor Manufacturing Company (TSMC) is the largest semiconductor manufacturer globally, producing chips for major companies like Apple and Nvidia, and holds over 50% of the third-party chip production market [10][11]. - TSMC has experienced significant growth, with Q1 revenue increasing by 35.3% year-over-year to $25.5 billion and net income rising 60% to $10.9 billion, showcasing its strong pricing power with an operating margin of 48.5% [12]. - The stock trades at a price-to-earnings ratio of 25.6, which is in line with the S&P 500, and TSMC is well-positioned for long-term growth due to its technological strength and diversification efforts [12][13].