Future Apple Announcement Will Create Perfect Buying Climate For Intel
I wrote last week in a piece entitled ‘All-In on Intel’ that Intel is quietly creating a small empire in the A.I. industry, an industry that will likely have one of the largest upsides in the entire marketplace over the next several years. Nvidia’s recent success up 200% in the past year is a precursor to the overwhelming market tides moving towards extreme oceans of capital in the name of A.I. innovation amongst tech giants. But as my father once told me, if the timing isn’t right on an idea or an investment, it doesn’t matter how good that idea was in the first place. Since I am bullish on stocks that are heavy in A.I. like Nvidia or Intel, I still have to hold off on purchasing the latter despite all the beautiful upside the firm presents. Why is this? The timing is not right, and I’ll tell you why.
While Nvidia is the flashy young buck of the chip stable, Intel is seen as an old-time staple, heavily talked about by fintech investors for the greater part of a decade. Many tech investors aren’t yet aware of Intel’s plans to go from a traditional desktop/laptop chip-maker to a company whose main preoccupations are in autonomous driving, machine learning and deep learning, the three major branches of contemporary A.I., while their chips in traditional laptops and desktops will become an afterthought. Part of this is Intel hasn’t really publicized these aspirations, mostly for strategic and stockholder reasons. Part of this is simply due to the stickiness of production and the tradition within Intel itself, a philosophy that the firm (whose stock has been flat for the past few years) hasn’t changed until recently.
The reason why that philosophy had to change towards a new horizon? Reality has caught up to Intel Engineers and management that chips in mobile devices are the biggest threat to their core base of chips, and that they would have to step into new realms before being obsoleted. The biggest of all of these threats- Apples in-house ‘A’ line of mobile chips that are currently used to power Iphones.
To break it down in simple terms, apple outsources its laptop and desktop processing units to Intel, but its chips in its mobile devices are made by Apple themselves and they are good. Apple’s new A11 chip featured in the iphone 8 and X are actually as fast as Intel chips in apple’s lower lines of laptops and desktops. This is very impressive, however, it should be noted that the A11 chip in the new Iphone is not as powerful as Intel’s more powerful chips used in the ‘Pro’ series of Apples’ product line. And thus we have a Tipping Point: at the rate Apple is innovating in chips, it is a matter of time before Apple creates chips faster then anything Intel can offer in the traditional laptop and desktop space. It will be at this junction that Apple naturally decides to not have Intel chips in any of its machines anymore, but use Apple chips (maybe future iterations of the A11) in all of its products, not just mobile devices.
When this tipping point occurs, it will beat down the stock of Intel, as they will no longer supply Apple with chips of any nature. This will of course be negative for holders of Intel stock in the short term, but will create an amazing opportunity to buy the stock at a discount when Apple does eventually pull the plug. One can be patient, wait until Apple announces its own chips outside of mobile, let Intel tank, and then pick it up. You will have just invested in a firm with the greatest A.I. potential in the tech industry at a discount, and it’s all predicated off of that one announcement from Apple. The second option would be holding any current position you currently have in Intel or adding to your position if you are to expect a quick return from it’s A.I. divisions, while treading carefully into the second two quarters of next year. If you opt for the latter, I at least suggest selling off some of the position towards the end of next year so you can lock in gains and free up cash to buy the stock back after Apple announces a chip line for its non-mobile devices.