Intel stock fell Tuesday as a rebound in chip stocks came to an abrupt end and overshadowed the company’s newly expanded deal with Cadence Design Systems that looks like a sign of confidence in Intel’s next-generation chip-manufacturing process.
Intel shares declined 2.1% to $107.92, but well off an intraday low of $99.46, on Tuesday. The move came after an 11% gain the previous day amid excitement that Google and Nvidia were using Intel as a backup manufacturer for advanced processors, according to a report. Intel declined to comment to Barron’s.
Intel stock has risen roughly fivefold in the past 12 months, much of that based on hopes that its current 18A and future 14A manufacturing processes can attract outside chip making customers and therefore offset the billions of dollars worth of quarterly losses it is booking in its foundry, or chip-manufacturing unit.
There are growing signs Intel is confident it can attract external customers. The latest was an announcement late Monday that Intel is expanding its deal with Cadence, a company that makes software and hardware that speed up the process of designing chips. The companies said the multiyear collaboration was aimed at optimizing the 14A manufacturing process.
“Cadence wouldn’t do this if there weren’t [a] high probability for high performance and mobile wafer customers for Intel 14A,” said Moor Insights & Strategy analyst Patrick Moorhead.
Intel was a Barron’s stock pick in April when shares were trading at around $64.
Cadence shares declined 0.9% to $390.90. Stifel analyst Ruben Roy reiterated a Buy rating on the stock with a $432 target price.
“Intel 14A represents Intel Foundry’s potential to re-establish process leadership and attract a more significant set of external fabless customers,” Roy wrote. “If Intel 14A gains traction, we believe that Cadence could prove to be well-positioned to capture incremental EDA [electronic design automation]/ IP spend.”
