Instant Reaction: Intel Gives Weak Forecast, Shares Slide Afterhours

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3 ,000 journalists and analysts around the world. Focusing once again on earnings and Intel certainly on that list as we see it bopping around in the aftermarket. What does that mean? We've got Intel shares down about 3.8 % as we speak. And some of it has to do with a weak forecast, supply shortages, hampering sales. This is not a new story that we've heard around the chip companies, particularly when it comes to AI. The demand is there. They can't meet the demand, which is kind of a good positive story that the demand is still there.

1:46But it's not great when you can't meet that. And you're just trying to kind of connect the dots there. Yeah, I want to bring in Ivan Feinseth, Research Director and Chief Investment Officer at Tigris Financial Partners. The firm has more than$500 million under management. in. Ivan has a buy rating on the company's stock. Ivan, your immediate knee-jerk reaction to this, does your rating change? Well, I know you can't answer that question, but your knee-jerk reaction, I'm not even going to ask you, your knee-jerk reaction to the numbers here. You're shaking your head. It's not this quarter. It's not a quarterly story.

2:21It is a major shift in the company. And they have, I think, turned a major corner, But the stock has also run up significantly from a low of 20. It hit$55. So I think it may have gotten a little bit ahead of itself and it may pull back. But I think everything that's going on under the new CEO, Lip Pitan, is as planned. I mean, they are well positioned to benefit from AI data center demand, AI computer demand, their partnership with Intel, money from the U.S. government. So they are plenty flush to invest in all of their key growth initiatives. So fundamentally, what's changed, Ivan, when it comes to this company?

3:06You obviously sound really upbeat. Is it just a case of having the backdrop because, you know, of the United States government? Is that what's done it? You know, kind of. Well, it's everything. OK. It's the it's first of all, it's the it's President Trump's push on what's sold here is made here, investing in U.S. semiconductor manufacturing capacity here, expanding the Intel foundry business, as well as the growth of data centers, the growth of AI-enabled PCs. So they are positioned, I think, perfectly to benefit from what was in the early innings that were going to be a long game of the AI-driven growth in both the tech sector and the US and the global economy.

3:58So, okay, I just want to, this is a different company than it was six months ago, as a result of the U.S. investment. And I'm wondering what that position, what that type of, what that investment does for Liputan's position. Like, you know, when you're the CEO of a company and you come out with a report, you're obviously, you got to worry about the board. You got to worry about shareholders. Now he's got to worry about a phone call from President Trump because the president likes to talk about how well the stock has done since the U.S. made that investment. What is that? How does that change the dynamic?

4:38It doesn't. But it's really funny that President Trump wanted to go from deporting the guy to giving the guy money. Hey, that's the power of a conversation, right? But it also shows. Absolutely. But it also shows how quickly things can change, certainly from the White House perspective. Well, it highlights Trump's perspective on driving the U.S. manufacturing infrastructure. U.S. leadership in all key areas and semiconductors is a very important area, especially that Intel makes semiconductors for the defense industry. Interesting. Okay. So does it make the defense business stronger? Absolutely.

5:21Hey, there's no better partner. One, a number one partner, I don't, well, it could be a tie. U.S. government and NVIDIA. Okay, so let me - Those are the two best partners you can get. Let me ask this question a different way than Ivan. And that's about where Intel would be right now if the U.S. government had not made that investment. Would this be a completely different picture? Would it have been a completely different quarter? Well, yeah, I think this has helped. I think this removes concerns, balance sheet concerns, and allows the company and the CEO to focus on business. A partnership with NVIDIA is great, and a partnership with the US, it opens up doors.

6:01They're back working with Apple. They're going to be working with everybody. And I think you're going to see Intel as a major contender as a semiconductor foundry, semiconductor manufacturer to take on Taiwan Semiconductor. So, okay, going back to Intel, under pressure in the aftermarket, We continue to track the share price, I think, down about 4 % or 5 % as we speak. The forecast for the first quarter, top and bottom line, disappointing. At the same time, it's talking about the CEO saying demand is quite strong, says the chipmaker missed a lot of opportunities, says production yield is not up to his standards.

6:38And then he goes on to say making, or Intel says, the company making good progress in 14A production, on track for volume production in 2028, has multiple engineering engagements on 14A. Help me understand what that means. These are different chips. The 14A, the 18A that they, and the announcements that they made earlier this month at the CES, they got their latest semiconductors on track to go into production to meet huge demand. Demand for all semiconductors is outstripping supply. There's in fact, concerns of memory shortage and processor shortage. So the demand wind is a tailwind. And they are back to innovating and developing and winning customers and working with key computer manufacturers, key hyperscaler, cloud service providers.

7:34And I think that they got a tremendous tailwind. The stock ran up a lot. It went from 20 to 55. Even if it pulls back to 45, it's a buying opportunity. because I think that long term, they are going to be back. I mean, I don't think even be back to their former glory. I think they are going to be one of the world's leading semiconductor developers, designers and manufacturers. So the Foundry Services Division, their factory unit, revenue of about four and a half billion. It was a gain of about three point eight percent, Ivan, from the year before. it currently relies on almost exclusively, as you know, Intel product divisions for orders.

8:15It's looking to expand beyond that. Is that crucial for the company's future growth? It's crucial, but that is the opportunity to work with everybody because you got to realize that most of the other semiconductor companies, even NVIDIA, Apple, all of the companies like Google, Facebook, Amazon that want their own processors, Qualcomm, they're all virtual manufacturers. They don't actually manufacture. They outsource to companies like Taiwan Semiconductor and hopefully companies like Intel to manufacture their processors. You know, is the U.S. The U.S. is, at least from an investment perspective, things have kind of quieted down a little bit since this summer.

8:58But are there any other companies, particularly companies within your universe that you follow, that could see, in your view, an investment by the U.S. government? You know, that I don't know. The other companies that I like in the semiconductor sector are NVIDIA and Qualcomm. And, you know, NVIDIA is pretty flush. Yeah, they don't need. I don't think they could make an investment in the U.S. government. Yes, I really think it was great how it turned around after the meeting with Trump and Tan that Trump wrote a check. And also, we have a lot of government incentives to build semiconductor manufacturing capacity here.

9:45We have projects in Arizona, projects in Ohio. So ideally, the U.S. could be the semiconductor manufacturing capital for the world. So in terms of going back to, and you rightfully so, Ivan, point out the run-up that we've seen, in Ivan shares and Intel shares. You know, the information put out a story and it says Intel's forward EBITDA multiple has lifted to 20 times highest level since 2021, well above the 12 and a half times at which TSMC currently trades. This is what I was trying to get to before with our simulcast. I was talking market caps, but it has to do with valuation. Intel now pricier than TSMC.

10:25Does that make sense? Well, I always say I wish we could solve the mysteries of the stock market by dividing two numbers, like cash flow or even PE. Stocks go up for everything that you really can't measure. And this is about Intel's future. So we are going to see, if all goes well, a huge ramp up in revenue, in expansion in margin, an increase in cash flow, and then an increase in profitability. So I think their foundry business will ramp up significantly. And as their new processors come to market, revenue and cash flow and profitability will ramp up, also ramp up significantly. Yeah, Liputon saying, you know, Intel faces an execution challenge.

11:09We are laser focused as a team to improve that. To be candid, it's just our execution that needs to improve. Ivan Feinseth, great stuff as always. So appreciate it. He's, of course, Chief Investment Officer over at Tigris Financial Partners, joining us on Intel.

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