Intel plunges on internal problems; AMD caught in a sectoral sell-off

Shares of Intel (INTC) and Advanced Micro Devices (AMD) are down sharply this morning, part of a broader sector sell-off driven by macroeconomic factors in the United States.

Investors appear to be taking profits after multi-week parabolic rallies that sent valuations soaring to historic highs.

In fact, analysts at UBS called current multiples “statistical outliers,” sounding bubble-like signals in a research note today.

In addition, this massive exit is exacerbated by defensive positions taken before the publication, scheduled for May 20, of Nvidia’s “high-stakes” quarterly results.

With a 95% probability that a better-than-expected result accompanied by an increase in forecasts is already priced in by the market, investors are choosing to reduce risk on the entire AI complex rather than betting on an increase additional.

Why AMD stock is falling today

Although AMD remains a flagship stock of the AI ​​revolution, it is currently giving way in the face of increased macroeconomic volatility.

The yield on the 10-year US Treasury hit a new high on Friday, drying up the liquidity of high-growth technology stocks whose future profits are now discounted at a higher rate.

Added to this feeling of risk aversion are growing tensions in the Middle East involving Iran – which have pushed up Brent prices and revived fears of “tenacious” inflation.

As a result, the futures market is now pricing in higher probabilities of a Fed rate hike rather than the long-awaited cut, a toxic scenario for capital-intensive industries like chip manufacturing.

On May 15, a new report from UBS added fuel to the fire, warning that the rush for AI servers is entering a hypercompetitive phase.

As Arm architecture-based chips and custom silicon gain traction, analysts fear that traditional x86 processor players’ margins could become squeezed, forcing a revaluation of AMD’s stock valuation premium.

Why Intel Stock Is Crashing Today

In addition to the macroeconomic headwinds already mentioned, Intel stock is also under pressure from a more localized catastrophe.

UBS data reveals a stunning blow to its core business: Intel’s server CPU market share fell to 54.9%, marking a steep sequential decline of 370 basis points.

Losses are not limited to data centers; rumors in the Valley suggest that INTC’s much-vaunted foundry partnership with Apple is significantly smaller than investors were hoping for.

Reports now indicate that the deal may be limited to legacy and entry-level components, rather than flagship 2nm mobile processors.

This left Intel vulnerable, as it was the highest beta semiconductor stock this year.

As a result of this massive over-extension, INTC is leading the decline among semiconductor stocks – with the “first in, first out” mentality taking hold among institutional investors looking to protect gains accumulated since the start of the year.

At the time of writing, Wall Street houses have a “hold” consensus on Intel, with an average price target of just $83, suggesting a potential further 23% downside from current levels.