For the last several months, the question surrounding chip stock Intel (INTC) like a silicon fog bank was who would buy in on the 14A production node. There were possibilities, but none of them made the jump to actual customer. That gap has officially closed, as Intel’s first customer for the 14A process is Tesla (TSLA). And that revelation gave Intel shares a healthy boost, up nearly 2.5% in Thursday afternoon’s trading ahead of Intel’s earnings report.
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Forget margin or options. Here's how the pros trade TSLAWe had heard, previously, that Tesla was interested in working with Intel in putting together its Terafab chip-making operation. But now, it is official, and Intel will be putting its 14A process to work within Terafab’s confines. This was the point that Intel had been waiting for. There was a possibility, previously, that Intel would pull out of chip manufacturing altogether without a major external customer. Tesla’s arrival in that role just made a huge difference going forward.
Better yet, Intel now has an opportunity to start ramping up its 14A process, and demonstrate to other customers just how well it works and how quickly it can get up to snuff. It also may serve as the kind of thing that pulls some of the other potential deals off the fence and moves them squarely into Intel’s camp. Indeed, Tesla is a big customer by itself, and could be the start of something far bigger for Intel.
Stranger Surge
So some likely know at this point that one of Intel’s biggest competitors, AMD (AMD), has a significant lead over Intel in performance in some measures. It turns out there is a reason for this, and the biggest reason is an issue of software.
Robert Hallock, Intel’s vice president and general manager of the enthusiast channel, revealed that there is not much difference in hardware between AMD and Intel processors on several fronts. Hallock notes there is a trivial difference, about 1%, hardware-wise. But the reason that AMD processors might do up to 30% better than Intel’s is a matter of software optimization. Most software is not optimized for Intel, Hallock noted, which causes the performance lag.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on seven Buys, 23 Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 203.72% rally in its share price over the past year, the average INTC price target of $56.41 per share implies 15.26% downside risk.
