Intel (INTC) trades down 28% from its all-time high, which it hit at the end of June, but shares are still up over 300% year-over-year. Today both INTC and SK Hynix (SKHY) move higher on a Reuters report.
The Reuters report
Reuters says SK Hynix is in talks with Intel (INTC) to possibly make chips in the US. This would be the first time the South Korean company ever produced chips on US soil. Two possible setups were laid out. First, SK Hynix could lease part of Intel's long-planned chipmaking plant in Ohio. Second, it could form a venture with Intel and other large cloud firms that also want to lock in memory chip supplies.
SK Hynix response
Intel (INTC) has not commented since the report. SK Hynix put out a statement: it is exploring various options to strengthen its global competitiveness, but no specific plans or arrangements have been finalized. No decisions have been made on the two scenarios in the article. It clarified that nothing has been finalized on cooperation with any specific company named or on memory chip production in the United States. So the company is not confirming Intel, but not denying it either.
Why it matters
A deal would be a big win for Intel (INTC). It has been looking for more customers for its foundry business, a key part of CEO Lip-Bu Tan's turnaround plan. It would also help government efforts to bring more semiconductor manufacturing to America through reshoring. One risk flag: a deal between Intel and SK Hynix to make memory could face opposition from the South Korean government, because those technologies are seen as sensitive - Reuters reported this citing several sources.
Intel (INTC) trades up about 4.33% today. Nvidia (NVDA) is more than 1% higher. Micron (MU) is also higher; Micron is seen as the premier US choice for memory, so confirmed talks raise questions about the competitive threat to it.
Example Intel options trade
Until today, implied volatility on Intel (INTC) was very low, and it is still relatively low after the move. That setup favors a call calendar or a call diagonal to take advantage of the low implied volatility. The specific idea: a 108 calendar, entered if INTC reaches 102.88 or above. That level was crossed this morning but the stock fell back below it. If it gets back above, the trade would be bought for $1.50 to $1.75, which should give at least a 1.5-to-1, and possibly 2-to-1, return.
Rate view ahead of the Fed
A rate move is essentially a given based on the data and Fed funds. If the Fed does not act as expected, the market reads it as ignoring the data and sells off. If it moves as expected, that is largely understood and some implied volatility comes out. Then it depends on Powell: if he signals the start of a regime of future rate hikes, that would be rough for the market; if he says the Fed did what it thought it needed to do and is now in wait-and-see mode, the market goes up from there.
