No. of Recommendations: 5
This falling knife trade has worked out pretty well. Price at the first post back in July was $22.63. Current price is $38.50. My sense of the stock is that it no longer reflects the pessimism that drove down prices to "unreasonable" low levels. I put that in quotes because you could think it was reasonable if you didn't believe there was a high probability of a US government put option. But if you believed that the US would want to keep a US owned domestic producer of CPU and AI chips, you would be betting that luck would go your way. Some customers would be users of foundry services for reasons other then technical leadership, and unexpected mechanisms would arise to keep INTC out of the worst scenarios.
Fast forward 5 months and the valuation now reflects what I think is more reasonable for their situation. A lot of the downside protection story has now been reflected in the valuation. There is still potential for good upside with potential customers like apple becoming foundry customers.
I think this is kind of now done as a Falling Knives trade. The valuation seems reasonable again given that momentum on the commercial side is a speculative hope still, rather than demonstrated reality. The opportunity to invest in INTC as a bounce back to rationality I think has been played out.
I am now holding the stock on the potential of the foundry business to make some real customer inroads competitively. If it does, it should behave like a normal business with the potential for upside based on earnings improvement. I think that potential does exist because the demand for chips of all sorts, including CPUs, seems to be benefiting INTC, AMD, SAMSUNG, HYNIX, etc. But with INTC, there is also the potential for customer wins just because the world can't live with the idea that manufacturing expertise for these strategically important categories and supply chain risk would be so concentrated with TSMC.
So holding for now, but probably my last post in this forum as what I would consider a falling knife investment.
