Intel's stock again stands out with gains in the face of chip weakness

By Emily Bary

Intel's stock is the best performer within the PHLX Semiconductor Index so far on Thursday

On another weak day for the broader chip sector, Intel Corp.'s stock performance stands out in a good way.

Intel shares (INTC) on Wednesday were one of only two gainers within the PHLX Semiconductor Index SOX as that index booked its worst performance in four years. Now, with the index off 0.7% in midday Thursday action, Intel's stock is the best performer of the bunch, up more than 4%.

Read: Why Intel's stock avoided the semiconductor sector's worst selloff in four years

Only a third of the index's components are in positive territory on the day, and only two stocks besides Intel - GlobalFoundries Inc. (GFS) and NXP Semiconductors N.V. (NXPI) - are seeing gains in excess of 1%.

See also: Nvidia, AMD shares shed gains, but their investors got some good news

Wednesday's weakness was related to geopolitical concerns about potential new policies that could affect technology exports to China or the chip supply chain in Taiwan. Intel conducts domestic chip manufacturing and is building out those capacities with money it was awarded through the Chips Act.

Intel and GlobalFoundries are "viewed as US domestic semi winners in a deglobalization move," Mizuho desk-based analyst Jordan Klein wrote on Thursday.

But BofA analyst Vivek Arya noted that while shares of Intel, GlobalFoundries and Texas Instruments Inc. (TXN) outperformed on Wednesday due to those companies' positions as "domestically sourced vendors," they are also "directly or indirectly impacted by what goes on in Taiwan."

Intel's "key PC chiplets" are made by Taiwan Semiconductor Manufacturing Co. (TSM) (TW:2330), he noted in a report.

Opinion (April 2024): Chip sector avoids a major crisis from Taiwan quake. But one lesson should be learned.

Another factor behind Intel's relative momentum could be that investors are rotating out of past highflyers in the sector. In doing so, they might be giving a closer look to Intel, which was one of the S&P 500's SPX worst first-half stock performers. The stock lost 38% in the first six months of the year but is ahead 16% so far in July.

BofA's Arya flagged that Intel shares are relatively underowned by active fund managers. "Notably, Intel at 14% ownership is held below [$100 billion-plus] market-cap peers ranging 19%-68% ownership," he said.

More from MarketWatch: Nvidia is most-owned chip stock in active funds - but another is moving up fast

Don't miss: AMD and Intel shares have lagged this year. Why a rebound could be in store.

-Emily Bary

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