INTC Continuing SPCX Terafab Involvement, Pushes Stock Higher Amid Tech Weakness

SPEAKER_1 (0:00)

For Backwell Morning Trade Live, let's focus on the chart for Intel. Down nearly 20% off the all-time high it reached over the summer, but still up over 200% this year. And Intel's role in Elon Musk's Terafab chip project is the focus of the morning trade. Joining us now for a closer look is Alex Coffey. The difference a couple of days makes as far as the details here. Alex, just run us through what we know now.

Alex Coffey (0:25)

Yeah, as you say, Intel is trying to reassure investors about its role in Elon Musk's massive Terafab chip project with its CEO Lip-Bu Tan telling Bloomberg that Intel will remain involved in the venture, pushing back on concerns that TSMC could take over a bigger role after Elon Musk said he had been in talks with TSMC.

Should also note that Elon himself perhaps was looking to calm those fears, posting on X that Tesla and SpaceX will build and run, quote, the fab, adding that TSMC might only sublease part of the facility. The clarification comes after Intel shares lost more than 5% earlier this week on worries its role in the Terafab could be diminished. Intel stock is, though, rebounding today up about 1.5% as investors got some of this reassurance. Though questions do remain about whether the chip maker will ultimately be the project's primary manufacturing partner, Terafab is Musk's ambitious plan, of course, to massively expand AI chip production part of a global race to build the infrastructure needed to support rapid AI growth. I do think, though, Sam, it's important to note, today is a day where you look at the SOX index, it's down about 1.8%. The fact that Intel is responding positively to this, both one, shows that there was real fears around this story earlier in the week, but two, that this reassurance is meaningful, because not only are chips under pressure today, but Intel is able to bounce back in spite of that.

SPEAKER_1 (2:13)

Yeah, absolutely. I would agree with that. I mean, certainly as far as the perspective is concerned, I mean, this clarification is interesting, because Terafab is such an enormous project. You would think that there was enough sort of business to go around, but clearly, this had got under investors' skin with the thinking TSMC could replace Intel here. But even though TSMC does work with Tesla, as we know as well, but yeah, interesting move we're seeing today. Thanks, Alex, for the details on that. We're up one and a half percent right now. So let's trade it now with Scott Bauer, CEO of Prosper Trading Academy.

Good morning, Scott. As Alex pointed out there, I mean, it does very much speak to how investors were feeling about this one, that maybe TSM was going to cut its grass or eat its lunch here. But how would you approach an example trade on this one?

Scott Bauer (3:02)

Yeah, I agree with Alex. Intel was a little bit stuck, the stock because of that concern.

Overall, this is obviously good news. I'd rather be on the long side than the short side, but I want to harvest some premium. So I am selling a bullish iron condor. I'm going out a little further than I normally would, but I'm going to sell the October 30th 105-100 put spread on the downside, sell the October 30th 125-130 call spread on the upside. I'm looking to collect about $2.75 on that. So Sam, on October 30th, my break evens in the stock would be 102.25 on the downside, 127.75 on the upside.

SPEAKER_1 (3:47)

All right. Good look at Intel there. As we said, it's come back obviously from, well, I should say it came off quite a lot, but it's still up quite significantly for the year, triple digits. Walk us through your thoughts on the market today. I mean, is this profit taking? Is this higher oil, higher yield, higher dollar? I mean, back to that, do you think?

Scott Bauer (4:06)

You know, I think it's a lot of jitters, and I think there's a lot of jitters today, specifically ahead of the big bond auction that we're going to, the 10-year, that we're going to get in just a couple hours here. So I think the spike in yields that we saw overnight going into the opening of the market was probably institutions trade looking for the bond auction not to be so positive here. But yes, I mean, squarely, squarely, the market is trading on oil and yields.

SPEAKER_1 (4:36)

Yeah, it's certainly something we're going to be watching on 1 p.m. Eastern for that 10-year note auction, $39 billion. Really appreciate it, Scott. As always, thanks so much for jumping on with us today, Scott Bauer, CEO of Prosper Trading Academy.