For those still claiming we are doing well

2018-09-12T19:27:00Z

We really are not... Intel Corp.’s stock has taken a technical beating this week, as it entered a bear market on Tuesday for the first time in over two years, the day after a bearish “death cross” appeared in the charts. https://www.marketwatch.com/story/intels-stock-falls-into-first-bear-market-in-over-2-years-2018-09-11

Only a fool looks at short-term stock price changes influenced only by hype (not new information). Wait a year and earnings will lift Intel. Below are facts. I encourage you to read the links.

I. On Intel's (INTC) "failure" to move to 10nm - Intel is shipping its 10nm chips in Lenovo and NUC computers right now. A patent firm tore one down and wrote a 20 page paper on it, and proclaimed it at least as good as competitors anticipated 7nm. http://www.techinsights.com/technology-intelligence/overview/latest-reports/intel-10-nm-logic-process/

II. On AMD's (AMD) anticipated Rome 7nm server chips

• Intel's 28-core Cascade Lake beat AMD's 7nm Rome for the 2019 35 PFLOPS supercomputer: "We took a look at AMD Epyc, both Naples and certainly Rome but with the combination of price, schedules, and performance, we felt like Cascade Lake was the way to get the best value right now." https://www.nextplatform.com/2018/08/29/cascade-lake-heart-of-2019-tacc-supercomputer/

• AMD's anticipated 7nm producer, Global Foundries, just said they wouldn't proceed with AMD's fab. On that same day, their top "senior vice president and general manager of the Computing and Graphics Business Group"Jim Anderson left. Why would you leave a rising company? https://www.pcworld.com/article/3300620/components-processors/amd-loses-another-key-executive-jim-anderson-as-it-shifts-manufacturing-to-tsmc.html

• AMD is now tied to one supplier, TSMC, which is not a good negotiating position.

III. On AMD's latest Epyc chips. These are a power disaster. The red bars on this graph are wasted energy. The reason it's so inefficient is that Infinity Fabric is power hungry. This is a problem because Infinity Fabric is AMD's way of implementing a bunch of cores on one chip. https://twitter.com/witeken/status/1029029801351360512

IV. On the recent stock price increases. AMD has not lifted revenue, earnings, market share or other guidance since its 2Q call. In other words, the price increase since then is not based on material new information.

• Remember FOMO. https://static.seekingalpha.com/uploads/2018/1/23/48558512-15167626365862508_origin.png

• Cowen upgraded AMD to $30 based on $1.75 EPS and $10 billion revenue, which is aggressive and unlikely. AMD is almost at $30 now on pennies of EPS and much less revenue. https://www.streetinsider.com/Analyst+Comments/UPDATE%3A+AMD+%28AMD%29+PT+Raised+to+%2430+at+Cowen%3B+Sees+%2410B+in+Rev%2C+%241.75+in+EPS/14570748.html

• Bank of America upgraded AMD to $35 based on $2 of EPS. https://www.reddit.com/r/AMD_Stock/comments/9d17x2/baml_raises_amd_pt_to_streethigh_35/

• AMD will probably have $0.12 (12 cents) of EPS the next two quarters. https://finance.yahoo.com/quote/amd/analysis/

• Some think the analysts have secret information that the public doesn't know, but that's impossible. AMD would violate SEC Regulation FD by doing that, and there's no reason to give analysts secret information that you withhold from investors. https://www.investopedia.com/terms/r/regulationfd.asp

• Some of the upgrades are clearly unserious. Hans Mosesmann (success rate of 57%, the same as flipping a coin https://www.tipranks.com/analysts/hans-mosesmann) upgraded AMD to $30 on August 23, and then upgraded it again to $40 on September 11 (three weeks later) with nothing new in his report. https://www.cnbc.com/2018/08/23/rosenblatt-raises-its-price-target-for-amd-to-street-high.html and https://www.marketwatch.com/story/amd-target-hiked-to-40-at-rosenblatt-2018-09-11?siteid=yhoof2&yptr=yahoo

V. On AMD's cash cow (graphics). It just lost to NVDA which revolutionized GPUs by implementing ray tracing on popular games. No serious gamer can see this video and not want an NVDA RTX, which is completely sold out on preorders. https://www.youtube.com/watch?v=WoQr0k2IA9A

• Incidentally, Intel dominates GPU in terms of market share (via its in-CPU graphics processors) https://www.extremetech.com/gaming/276425-charting-9-years-of-gpu-market-shifts-between-intel-amd-and-nvidia

VI. On the future and innovation. Intel continues to plug away . . . AI, FPGA, driverless, 5g/wireless, advanced memory, quantum (yes really https://www.youtube.com/watch?v=M4LTNn3Em7E ). If the past is any guide, when Intel makes money on these others will jump on board with "me too" but by then Intel will be onto the next thing.

• FPGA. Intel (via its purchase of Altera) is gaining on the only other player on the market. https://www.fool.com/investing/2018/08/14/intel-is-gaining-against-its-biggest-rival-in-this.aspx

• Wireless. Qualcomm just admits it lost Iphone to Intel. Qualcomm Admits That It Just Lost the iPhone to Intel. https://www.fool.com/investing/2018/08/02/qualcomm-admits-that-it-just-lost-the-iphone-to-in.aspx

• AI. Intel sold $1 billion of AI chips this year. https://www.reuters.com/article/us-intel-tech/intel-sold-1-billion-of-artificial-intelligence-chips-in-2017-idUSKBN1KT2GK

• 5G. These 4 companies will be the big early winners from the $326 billion push to 5G. https://www.marketwatch.com/story/these-4-companies-will-be-the-big-early-winners-from-the-326-billion-push-to-5g-2018-03-07 or Ericsson, Telstra and Intel achieve first 5G commercial network data call https://www.pcworld.idg.com.au/article/643911/ericsson-telstra-intel-achieve-first-5g-commercial-network-data-call/

VII. On culture. Intel is an outstanding place to work. AMD has lost key personnel like Raja Khoduri, Jim Keller and Jim Anderson.

• Best Workplaces. http://www.greatplacetowork.net/best-companies/worlds-best-multinationals/profiles-of-the-winners/1536-15-intel

• Fortune Best Companies to Work For http://archive.fortune.com/magazines/fortune/bestcompanies/snapshots/672.html

• Working Mother Best Companies https://www.workingmother.com/best-companies-intel

VIII. On political and trade risk. AMD has huge political and market share risk due to a JV that allows Chinese companies to sell Epyc clones. The history is below.

• In August 2015, the U.S. barred Intel (and implicitly AMD) from selling high-end server chips to a few (but not all) Chinese customers due to national security concerns. Intel complied. https://www.pcworld.com/article/2908692/us-blocks-intel-from-selling-xeon-chips-to-chinese-supercomputer-projects.html

• A few months later, China went to Lisa Su to get basically the same chip from AMD via a complicated joint venture that complied with the letter of the law -- because the chip would not be sold by a U.S. company but would rather be sold by the Chinese JV (so no need to ask the U.S. for permission to export it to Chinese customers). https://www.forbes.com/sites/patrickmoorhead/2016/04/21/amd-forms-china-x86-server-soc-jv-and-gets-293-million-to-start/#33633ca79df8

• A month ago, China started producing these Epyc server chip clones. As this article explains, they have a different name but are EXACTLY Epyc chips. https://www.tomshardware.com/news/china-zen-x86-processor-dryhana

• The U.S. government is due to publish a report on Chinese theft of U.S. semiconductor IP that could name and shame AMD. "ASSESSMENT OF THE U.S. INTEGRATED CIRCUIT DESIGN AND MANUFACTURING INDUSTRY" https://www.reddit.com/r/AMD_Stock/comments/87z5h9/ustr_china_jv_scheme_exposed/

• Based on the timing, it's clear the ONLY reason this JV was set up was to circumvent the government's ban.

• These chips will be in the hands of those very customers the U.S. government said couldn't have them.

• They will be taking market share from Epyc and only paying AMD a tiny royalty, instead of the large margins it would have made on Epyc.

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