Intel Q2 & SK Hynix Q2 – Story of Two Halves

Intel Q2 25 – No Answers.

• Intel reported another difficult quarter and gave no answers to the pressing question of how it is going to fend off the growing threat to its core businesses from Arm, Nvidia and co. in all of its businesses.
• Instead, it appears to be focused on cost-cutting, leaving it wide open to the predators that are taking every opportunity to take share whenever an opportunity presents itself.
• Q2 25 revenues / EPS were $12.9bn / LOSS$0.67 ahead of revenue estimates of $12.0bn but below EPS estimates of LOSS$0.56.
• Intel said that it thought the strong revenue was due to the pull forward of orders from customers ahead of any potential tariffs, meaning that this is not a sustainable driver of any recovery.
• Investments are also being slowed with sites in Germany and Poland being abandoned and the Ohio build being slowed.
• This ensures that Intel is going to fall further behind, which will increase the power and performance gap between Arm and x86 processors, making its products even less competitive.
• The problem is that Intel really only has two choices, which are to invest like crazy and compete on technology or to split itself up into pieces and sell them off to the highest bidder.
• Mr Tan appears to have chosen neither and is trying to navigate a course somewhere down the middle, which I think will end in the slow, painful decline of an industry titan.
• Qualcomm and AMD are the leading beneficiaries of Intel’s malaise, which looks set to continue, meaning that they should be able to continue taking market share without having to try very hard.
• With this outlook, there is no price which would entice me to buy the shares.

SK Hynix Q2 25 – Making Hay.

• SK Hynix reported excellent results as it continues to capitalise on Samsung’s failures and has every intention of making its advantage permanent.
• Q2 25 revenues / EPS were KRW22.2tn / KRW10.1K ahead of estimates of KRW21.0tn / KRW9.7K where most of the surprise was driven by its new-found leadership in the HBM memory segment, where Samsung failed to come up with a working product.
• This failure has given SK Hynix an unusually long lead time, which it has made the most of and is increasing spending in a bid to stay ahead.
• Its latest fab will open in Q4 25, which it will use to produce the next generation of AI datacentre memory, HBM4.
• This is where it is going to face stiff competition as Samsung has all but given up on generation 3 and is putting all of its efforts into ensuring that it will qualify with Nvidia on time for HBM4.
• The notoriously leaky Korean market is pricing in an increasing likelihood that Samsung succeeds, as the last month has seen Samsung’s share price rally by 20% while SK Hynix has lost 10%.
• The slip-up in HBM3 caused Samsung to lose 40% of its market capitalisation, creating an opportunity for anyone with the view that Samsung has the depth of character to recover from this blunder.
• Following its recovery from what looked like certain death from the Note 7 debacle, I think Samsung has the fortitude to ensure that HBM4 will work and work on time, meaning that it will take back a lot of the share it has lost.
• This should allow the share price to recover to the levels it enjoyed prior to the HBM3 failure, which is why I hold the London-listed global depositary receipt in my portfolio.