INTC & SKHY Surge on Report of AI Memory Chip Partnership

SPEAKER_1 (0:01)

Back on Morning Trade Live, let's focus on the one year chart for Intel, down 28% from the all time high. It hit at the end of June, but shares are still up over 300% year over year.

And Intel is in the news this morning alongside SK Hynix. So that is the focus of the morning trade. Joining us now with the details is Marley Kayden. It's gonna be interesting to see if any of these talks between the two companies are confirmed, but what do we know so far, Marley?

Marley Kayden (0:29)

We know a little bit. There's at least been a comment from SK Hynix in response to this Reuters report. Let's first walk through what the report says, then we'll get to the response and the potential implications. We are seeing both names move higher on the possibility that this come to fruition. But Reuters is reporting that SK Hynix is in talks with Intel to potentially manufacture chips in the US. This would mark the first time that the South Korean company ever produced chips on US soil, so it could potentially be a very big deal. They lay out a couple possible scenarios of how this relationship might work. One of them, SK Hynix might lease part of Intel's long plan chip making facility in Ohio. Another potential scenario could have them forming a venture with Intel and other major cloud firms that are also looking to lock in memory chip supplies. But SK Hynix did come out with a statement. Intel has not commented once this report came out. They said that, quote, SK Hynix is exploring various options to strengthen its global competitiveness, but no specific plans or arrangements have been finalized at this time. No decisions have been made regarding the two scenarios mentioned in the article. We would like to clarify that nothing has been finalized regarding cooperation with any specific companies mentioned in the article or memory chip production in the United States. So they're not confirming it's Intel, but they're certainly not denying it in that statement, Sam.

If we did see a deal struck here, it would be a big win for Intel. They've been looking for more customers for the Foundry business, which is a big part of CEO Liput Tan's turnaround strategy for Intel. It could also advance the government's efforts to try to bring more semiconductor manufacturing to America as a part of this reshoring or on-shoring process.

One potential flag to look out for here with this potential deal, if these talks do lead to something more concrete, a deal between Intel and SK Hynix to manufacturer memory could face some opposition from the South Korean government because those technologies are considered sensitive. That was one other thing that Reuters reported and cited. Several sources that that could be a potential issue here. But we are seeing both companies move higher today, Sam. We are up about four and a third percent for Intel. And we are looking at NVIDIA more than a percent higher on the session as well.

SPEAKER_1 (2:49)

Yeah, and Micron trading higher as well. I mean, because if these exploratory talks are confirmed, I mean, you wonder just what it means as like a competitive threat to that company, which obviously is kind of seen as the premier choice on American soil from memory. But yeah, interesting development. Thanks so much, Marley, for the details. We've got that statement from SK Hynix as well. Let's trade Intel now with Mike Shorr, Director of Trading Education, Prosper Trading Academy. Good morning, Mike. How would you approach an example trade on Intel?

Mike Shorr (3:20)

Yeah. So well, up until today, implied volatility was very low. And so I want to play that using that. And it's still relatively low, not as low as it was because of the move that we've had.

And so the two trades that would come up in that sort of situation would be either a call calendar or call diagonal. I want to take advantage of that low implied volatility. And like I said, it's still relatively low. So I'm looking at a 108 calendar. And hopefully, I want to get into this if we go to 102.88 or above. I want to see that we did get through that this morning, but now we're back below that level. But if we do, I want to buy that anywhere from $1.50 to $1.75. And that should give me at least one and a half, if not two to one returns.

SPEAKER_1 (4:15)

Okay, good look at Intel, which as we said, has come off the highs of the summer, but still very much in triple digits, a year to date. A broad sort of market thought for us, Mike, as we head into a pretty consequential afternoon here.