Proactive Investors - Intel Corp (NASDAQ:INTC, ETR:INL) and Advanced Micro Devices (NASDAQ:AMD) Inc (NASDAQ:AMD, ETR:AMD) shares traded lower on reports China told its telecom providers to phase out foreign chips, the latest move in the escalating US-China technology war.
According to a report from the Wall Street Journal citing people familiar with the matter, Chinese officials have told its telecom carriers to phase out foreign chips by 2027, a blow to US chipmakers Intel and AMD.
Shares of Intel were down 4.2% at about $36, while AMD shares shed 4.1% at about $163 in the early afternoon on Friday.
Meanwhile, competitive headwinds among other factors have prompted analysts at the Bank of America (NYSE:BAC) to lower their price target on 'Neutral'-rated Intel from $50 to $44.
These headwinds when combined with high costs, and large product and foundry business interdependence leave a limited opportunity for sum-of-the-parts value unlock, the analysts believe.
“Importantly, we see Intel Foundry as still fully dependent on the internal design team, and thus shift to a combined valuation methodology for the whole IDM business (Products + Foundry) rather than a separate sum-of-parts for each,” they wrote.
“A continued wallet shift toward accelerated compute (XPUs/ networking versus traditional CPUs) and the emergence of other leading-edge US foundries (TSMC/Samsung with $6 billion to $7 billion each in CHIPS Act awards) remain concerns.”
They also highlighted that Intel’s data-centric and AI sales remain at or below 40% of sales, below the 60% to 80% plus seen by its design peers.
In the bull case scenario, the analysts see a cyclical recovery after inventory normalization coupled with Microsoft (NASDAQ:MSFT) ending support for Windows 10 on October 14, 2025, lifting PC shipments back to the 300 million unit target by 2026, a near-term tailwind.
Other catalysts could be Apple’s Mac refresh which could drive use cases for AI PCs and that Foundry profitability is near trough and should improve from here with breakeven expected by 2026 to 2027.