Intel stock price gains 5% as hedge fund calls for strategic changes

Hedge fund Third Point LLC sent a letter to Intel Corp (NASDAQ: INTC), urging the chipmaker to make major strategic changes in a bid to regain market share. 

Fundamental analysis: A challenging year behind Intel

Third Point’s calls for changes could result in major decisions at Intel including whether to keep manufacturing chips in-house and unwinding some of its purchases such as the $16.7 billion buyouts of programmable chip maker Altera five years ago.

Intel has had a challenging year as the semiconductor company was slow to outsource a larger part of its manufacturing capacity. The activist hedge fund holds a nearly $1 billion stake in Intel. 

In the letter, written by the Third Point’s chief executive Daniel Loeb, it was said that Intel needs to resolve its “human capital management issue” as soon as possible as a number of its best chip designers have left the company, “demoralized by the status quo.”

Loeb added that the company is not the number one microprocessor maker in the world anymore, overtaken by Taiwan Semiconductor Manufacturing Co and Samsung Electronics Co Ltd.

Furthermore, Intel keeps losing its market share to its main competitor, Advanced Micro Devices Inc. Also, Intel has been less present in other emerging markets such as computational models used for AI, the king of which is Nvidia Corp. 

“Without immediate change at Intel, we fear that America’s access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on a geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more,” Loeb wrote.

Technical analysis: Negative performance in 2020

Shares of Intel closed 4.93% higher to $49.95 on the news, its biggest gain in more than 8 months. However, Intel’s shares remain 21% down year-to-date, while the Nasdaq Composite Index gained 43% during that period. 

Intel daily chart (TradingView)

Intel stock price is now fighting to close above the $50.00 mark, a region that hosts the 100-DMA at $49.15. This would improve the technical picture for the buyers with the next resistance line located around the $53.00 mark.

Summary

Daniel Loeb, CEO of the hedge fund Third Point urged Intel Corp to make significant strategic changes in order to regain its market presence as a challenging year for the chipmaker comes to an end.

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