Why Intel Stock Dropped Today
Key Points
Intel was pondering entering the computer memory market.
Then SK Hynix dropped a bombshell, raising $26.5 billion in its own Nasdaq listing.
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Intel (NASDAQ: INTC) stock slid 4.3% through 11:35 a.m. ET as investors caught a case of the Mondays -- and resumed worrying about the market for memory chips used in the artificial intelligence industry.
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SK Hynix: coming to America
South Korea's SK Hynix (NASDAQ: SKHY), now trading on Nasdaq, may be the catalyst. SK shares soared 14% on their Nasdaq debut before turning tail this morning and selling off by more than 6%. Now, Intel stock is following SK stock lower.
At first glance, this may not make much sense. SK Hynix specializes in computer memory -- high-bandwidth memory composed of DRAM memory chips primarily, where SK holds a 50%-plus market share, but also DRAM in general, where its market share is 29%, and NAND flash memory, too, where its market share is about 20%.
Intel doesn't play a big role in any of these markets, being primarily a CPU specialist.
However, in a memory market facing potentially its "worst-ever supply shortage," Intel has been exploring entering memory production, announcing in February a partnership with tech giant Softbank Group (OTC: SFTBF) to develop a new kind of memory technology.
What this means for Intel stock
Although it's early days in the Intel-Softbank partnership, the companies are said to be developing a "high capacity, high bandwidth, and low power consumption" chip that could put Intel in competition with SK Hynix -- which just got a $26.5 billion cash injection from its Nasdaq listing, making it a stronger competitor.
How bad is this news for Intel investors? Honestly -- probably not very bad. We don't even know if anything will come of the Softbank partnership after all. Still, with Intel stock costing 900x earnings today, it's probably best to be safe, and today's news seems a fine excuse to sell Intel stock.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel. The Motley Fool has a disclosure policy.
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