Every chip stock investor should have a position in Intel, and we just got a reminder why

The prospect of tighter U.S. export restrictions to China and recent comments by presidential candidate Donald Trump have pushed chip stocks down somewhat. Semiconductor stocks fell as the Biden administration raised the possibility of tighter trade restrictions on the industry, while Trump suggested that if elected, he would want Taiwan to pay the U.S. for its defense. Taiwan, home to the world’s largest foundry operator Semiconductor Manufacturing in Taiwan (NYSE: TSM)captures about 62% of global chip foundry revenue, according to TrendForce. Concerns about the future have led to a selloff in TSMC as well as stocks like Nvidia (NASDAQ: NVDA) And Advanced microsystems (NASDAQ: AMD)which rely on TSMC’s fabs for production and have also reported significant sales in China.

One of the few stocks that reacted positively to this news of the presidential candidates was Intel (NASDAQ:INTC)whose stock price rose sharply on Wednesday before pulling back for a modest gain. And while that wave of enthusiasm quickly faded, it was a reminder why serious investors in the semiconductor industry should at least have some understanding of the company’s value. Intel Actions in their wallets.

The State of Intel

Granted, Intel’s golden age is probably long behind it. It lags behind AMD in chip design, and its new third-party fab, Intel Foundry Services (IFS), is behind TSMC and Samsung in terms of process technology.

Intel does have the advantage of being in a prime location: Most of its foundries are outside East Asia. So when politicians raise the possibility of trade restrictions or express fears that China could invade Taiwan, investors view Intel as a safe bet.

The assumption that China would invade Taiwan is just speculation. What is not speculation is that the chip foundry industry is concentrated in Taiwan. To this end, the United States and other Western governments are offering chip makers subsidies worth tens of billions of dollars to build more advanced manufacturing plants in the United States and Europe.

These subsidies benefit Intel and its plans to build cutting-edge factories. In addition, as it purchases the most advanced chip manufacturing equipment ASMLits potential to quickly catch up with its competitors is better than some might assume.

Understanding Intel’s Financials

Thanks to its investments in strengthening its production capacities, Intel is showing an improving financial position, but it remains in difficulty. In the first quarter, its revenue increased by 9% compared to the previous year to reach $13 billion. This is a notable improvement compared to the 14% decline in its revenue for the whole of 2023.

The story continues

As part of a massive investment in its future, the company spent 15% more on operating expenses. Despite the increase, its first-quarter net loss narrowed to $381 million, a small fraction of the $2.8 billion it lost in the first quarter of 2023.

Management had not forecast any significant revenue growth for the second quarter. As a result, its stock has fallen more than 30% since the beginning of the year. Moreover, if there is no political unrest…