Increased CPU Demand

Please click here for an enlarged chart of Intel Corp (NASDAQ:INTC).

Note the following:

  • This article is about the big picture, not an individual stock.  The chart of INTC stock is being used to illustrate the point.
  • The chart shows the jump up in INTC stock on earnings in the after hours yesterday.
  • RSI on the chart shows INTC has returned to overbought, but the stock has more room to run.
  • Going into earnings, whisper numbers on Intel had moved up.  Intel beat even those higher whisper numbers.  Stocks move based on the difference between reported earnings and whisper numbers.  Whisper numbers are the numbers analysts privately share with their best clients and are different from the numbers the same analysts publish for public consumption.
  • Intel has just reclaimed, after 26 years, the high of $75.81 made in August 2000.
  • In our analysis, here is the most important point for prudent investors to know.  As AI shifts to agentic AI, demand for CPUs will go even higher than the current high demand.  The main reason behind Intel beating whisper numbers is high demand for CPUs for AI data centers.  For AI training, demand for GPUs exploded, but demand for CPUs did not increase.  Intel is not a major vendor of GPUs, and this is the reason INTC stock previously lagged.   
  • Is Intel the next NVIDIA Corp (NASDAQ:NVDA)?  Consider the following points:
    • Nvidia is the major vendor of GPUs.  Intel is a major vendor of CPUs.
    • AI demand for GPUs is significantly higher than the demand for CPUs.
    • No other company in the world comes even close to the capabilities of Nvidia GPUs. Intel has competition from Advanced Micro Devices Inc (NASDAQ:AMD) in CPUs.  Some experts consider AMD CPUs to be better than Intel CPUs.
    • Arm Holdings PLC – ADR (NASDAQ:ARM) is jumping into the business of making CPUs.  Until now, Arm has simply been licensing its IP.  Arm RISC architecture has major advantages over Intel's CISC architecture.  Arm is majority owned by SoftBank Group Corp – ADR (OTC:SFTBY) of Japan, and thus has the financial muscle to become a formidable competitor to Intel.
    • For AI, Nvidia has a significant software moat that no other company comes close to.  Intel does not have that advantage in AI.
    • Nvidia does not manufacture its own chips, and thus is not distracted by issues related to manufacturing advanced AI chips.  Taiwan Semicndctr Mnufctrng Co Ltd (NYSE:TSM) manufactures Nvidia's chips.  Intel has its own foundry.  Intel just had a major event with Elon Musk's Terafab deciding to use Intel's 14A process.   However, Intel's 14A process is not mature and TSM is more advanced in semiconductor manufacturing processes.
    • Nvidia is overowned.  This is the reason that in spite of improving fundamentals, NVDA stock has had difficulty moving up at the same speed as other semiconductor stocks.  When a stock is overowned, not many buyers are left to buy, even on good news, unless the stock breaks out.  In contrast, Intel is underowned and thus has a significant pool of buyers who can step in to buy INTC stock.
    • Most analysts already rate NVDA stock as a buy.  The followers of these analysts have already bought NVDA stock.  Until yesterday, most analysts did not have a buy rating on INTC stock.  Now, as analysts rush to upgrade INTC, their followers will buy INTC stock.
    • The momo crowd has just discovered INTC stock.  The momo crowd does not do any deep analysis.  The momo crowd primarily buys a stock because it is going up.  When the momo crowd's own buying moves a stock higher, it strengthens the momo crowd's behavior and thinking they are geniuses, they buy more of the same stock.  This momo crowd behavior can run a stock much higher than fundamentals justify or any prudent investor would think.
    • As full disclosure, NVDA is in our portfolio, long from an average of $19.05.
  • The U.S. government bought INTC stock at $20.47, and now has a paper gain of over $37B.
  • There is optimism about an Iran deal for the following reasons:
    • There are reports that Iran may have only two to five days of oil storage capacity left.  This is going to force Iran's hand to give concessions and strike a deal with the U.S.  
    • Iran's power struggle has resolved in favor of a hardliner stance.  Paradoxically, with a unified Iran, this increases the probability of a deal.
    • Iran's foreign minister is going to visit Pakistan.
  • Prudent investors need to look ahead.  Pension funds and some other institutions will be doing month end rebalancing.  In our analysis, rebalancing will involve selling tens of billions of dollars of stocks.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Nvidia (NVDA), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL).

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Very Very Short-Term Indicator

Today is a Friday.  Fridays tend to have short squeezes, putting additional upward pressure on the market. 

Bitcoin

Bitcoin (CRYPTO: BTC) is range bound.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.