It's Time to Get Out of Intel

It would appear that I may have overstayed my welcome. Sure, I got myself long a few shares of Intel  (INTC)  a few months back. In early August, Pres. Donald Trump had called for the resignation of still new-ish CEO Lip-Bu-Tan. Lip-Bu-Tan would try to rescue the once mighty semiconductor design (and foundry) giant from the back-to-back-to-back disasters that were Brian Krzanich, Bob Swan and Pat Gelsinger.

Intel had become the butt of industry jokes as companies like Nvidia  (NVDA) , Advanced Micro Devices  (AMD)  and Broadcom  (AVGO)  had become the elite of chip design, but Taiwan Semiconductor  (TSM)  dominated the foundry business. Then, in November 2024, Intel suffered the indignity of being replaced in the Dow Jones industrial average, which is no longer considered a major measure of equity market performance, but with only 30 member stocks, is still considered a prestigious index to be a part of) by the already mentioned Nvidia. Ouch!

Well, it came to light that Lip-Bu-Tan, before taking the helm at Intel, had been an investor in a number of Chinese tech firms. Intel scrambled to schedule a meeting between the president and the CEO. The president came away from the meeting committing to a multi-billion-dollar investment in Intel that would leave the federal government with a nearly 10% stake. Both Treasury Sec. Scott Bessent and Commerce Secretary Howard Lutnick were present. Both are "no nonsense" guys, and the Intel CEO still pulled off that deal. I became invested. It worked. For a while. Maybe it should have been a trade.

New News?

Intel is trading lower on Christmas Eve morning on reports from Reuters that Nvidia had recently tested whether it could manufacture its high-end, complex chips using Intel's foundry process. Neither Intel nor Nvidia has responded to media requests for comments. Earlier in the year, Intel shares had benefited from news that both Nvidia and Broadcom had decided to test Intel's production process for the manufacture of their chips.

Additionally, in an interview with Liz Claman at Fox Business in November, AMD CEO Lisa Su, when asked, chose not to rule out eventually turning to Intel for its foundry services. A failure to secure Nvidia's business could cost Intel a great deal of business. Neither Broadcom nor AMD would want to be seen as less advanced in design than Nvidia in the production of AI-capable chips. We are still more than a month out from Intel earnings.

The Chart​

Readers will see that since early August, INTC has developed a rising wedge pattern of bearish reversal. 

This is close to a double top, which would also be bearish, but I think it's a wedge. Note that this morning, INTC is threatening to break support at the lower trendline of that pattern. That could set up a fall in the share price to either the 200-day simple moving average or, worse, a fill of that gap created in September.

Relative Strength is not a disaster, but it is weakening and now resides below neutral. The daily moving average convergence divergence is in lousy shape. The histogram of the 9-day exponential moving average now stands well below zero (a short-term bearish signal), while the 12-day exponential moving average has dropped significantly below the 26-day exponential moving average and into negative territory (more of a medium-term bearish signal).

My Plan

I'll be exiting my long position in INTC later today. My only reservation is that I am not sure that I want to be getting out of a name that the federal government has put cash behind. That said, the disclosure below shows that I am long all four of the stocks mentioned in this piece and that does leave me somewhat overexposed to the space. I would rather not sell any of those three, and I want to have some dry powder for the next time memory chip design Micron Technologies  (MU)  sells off. I took my profits there way too early.

At the time of publication, Guilfoyle was long NVDA, AMD, AVGO, INTC equity.