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On Tuesday, Wolfe Research maintained its Peerperform rating on shares of Intel Corporation (NASDAQ:INTC) following the company's announcement of the formal split of its manufacturing business into a separate entity.
The move by Intel is intended to reassure potential foundry customers about the independence of the businesses, aiming to protect customers' intellectual property and interests. Intel's management believes the separation will allow the chip business to make independent decisions, separate from the manufacturing operations.
The research firm noted that while some market participants might view the separation as a step towards a complete spin-off of the manufacturing division, it does not consider such a move to be beneficial. The firm argues that the chip and manufacturing sectors are closely connected, with the manufacturing side having essentially one customer and involving high fixed costs.
A spin-off could potentially lead to a long-term supply agreement between the two entities, similar to the relationship between AMD (NASDAQ:AMD) and Global Foundries, which might limit the chip company's flexibility.
Moreover, Intel announced a multi-billion-dollar supply agreement with Amazon (NASDAQ:AMZN), which includes an artificial intelligence (AI) fabric and a custom Xeon CPU. The research firm sees this agreement as a positive development but suggests it may not have a significant incremental impact on revenue.
The AI fabric design, while new, is considered analogous to existing AI compute infrastructure components offered by competitors and may represent an extension of current services provided to Amazon rather than a substantial new revenue source.
Wolfe Research plans to engage in further discussions with Intel to obtain more details about the implications of the supply agreement with Amazon. The firm's current stance on Intel's stock reflects a cautious outlook on the potential benefits of Intel's recent strategic decisions and partnerships.
In other recent news, Intel Corporation and Amazon Web Services (AWS) have announced a multi-billion-dollar collaboration focused on custom chip designs to enhance artificial intelligence (AI) applications. The strategic partnership aims to foster a sustainable domestic AI supply chain and accelerate semiconductor manufacturing in the United States.
Meanwhile, Teresa Ribera, Spain's Minister for Ecological Transition, has been nominated as Europe's new antitrust chief, a position that will see her overseeing crucial decisions on multi-billion euro mergers and maintaining stringent antitrust rules.
On the other side of the globe, the Competition Commission of India (CCI) has found that Amazon and Flipkart have breached local competition laws, favoring specific sellers on their platforms. Samsung (KS:005930) and Xiaomi (OTC:XIACF), among other smartphone manufacturers, have been implicated in this case for their exclusive product launches on these platforms. The CCI's findings could lead to further regulatory scrutiny and potential penalties for these e-commerce firms.
In the realm of financial analysis, BofA Securities has maintained a Neutral rating on Etsy (NASDAQ:ETSY), suggesting that recent rule changes reducing advertising costs for the online marketplace may have a limited impact on Etsy's Gross Merchandise Sales (GMS). Finally, Amazon has announced a 7% wage increase for its drivers, reflecting a significant investment in its delivery service partners.
These developments highlight the dynamic and complex landscape of the global tech industry.
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