Intel, a global chip giant with a probing heavy position in QDII public fund, has just hit its largest daily decline in three years.
Intel, which is lagging behind in the AI chip craze, plummeted 11.91% on the 26th Beijing time. Intel has long been excluded from the top ten heavily held stocks list by many fund managers, and the company has often played a backup role in its historical periodic reports. However, at the end of the fourth quarter of last year, this chip giant, which had long been bearish, suddenly regained the attention of funds. Several QDII fund managers have tentatively placed heavy positions in Intel. However, considering that QDII fund managers have emphasized in their quarterly reports that chip equity adjustments will be affected by the performance guidelines of listed companies, Intel, which has returned to the fund's QDII heavily held stocks, may be eliminated again.
Low performance or embarrassing fund decisions
Affected by bearish expectations, the stock price of chip giant Intel plummeted 11.91% to close at $43.65 per share, marking the largest daily decline since July 2020. On January 26th Beijing time, Intel disclosed its financial data for the fourth quarter and full year of the 2023 fiscal year. In the fiscal year 2023, Intel achieved a revenue of $54.2 billion, a 14% decrease from $63.1 billion in the same period last year; The net profit attributable to the parent company was $1.7 billion, a decrease of 79% from $8 billion in the same period last year; The adjusted profit was $4.4 billion, a decrease of 36% from $6.9 billion in the same period last year. Among them, the revenue in the fourth quarter of 2023 increased by 10% year-on-year to 15.4 billion US dollars; Under non GAAP accounting standards, the net profit attributable to shareholders increased from $600 million in the same period last year to a profit of $2.3 billion.
The disappointing performance has further increased investors' concerns about Intel's competition in the new chip market. The company is currently lagging behind its competitors in the AI chip layout. Wall Street analysts believe that as global competitors benefit from the AI and artificial intelligence boom, Intel's ability to establish a foothold is still unknown. A key set of data is that Intel's second largest division is the data center and artificial intelligence division, while its revenue in the previous quarter was $3.985 billion, a decrease of nearly 10% year-on-year.
Due to the increasing advantages of its competitors, Intel itself is not as attractive to fund managers as other well-known competitors.
A Chinese journalist from a securities firm noticed that in the past two years, Intel has not been able to enter the top ten core stock pools of Technology QDII in the US stock market, and even index funds have removed Intel from the list. Relatively speaking, the main companies that have long appeared on the list of Technology QDII heavy holdings are Chaowei Semiconductor, Nvidia, Microsoft, and other companies. Fund managers have long excluded Intel from the heavy holdings, which significantly illustrates the issue of competitive advantage. The sluggish performance guidance this time has made fund managers who have just begun to "observe buying" Intel feel embarrassed.
Intel's long-term role as a reserve stock for funds
Fund managers have tentatively re covered Intel stocks, largely because the stock has been playing a backup role in the QDII fund stock pool.
According to the fourth quarter report of public funds in 2023, Intel became the core stock of seven QDII funds as of the end of the fourth quarter of last year, and all seven QDII funds listed Intel as one of the top ten heavy holdings for the first time in the past two years. Including Guangfa Global Selection Fund, Huaxia Global Technology Pioneer, Tianhong Global High end Manufacturing Fund, Chuangjin Hexin Global Chip Industry Fund, E Fund S&P Information Technology Fund, Changxin S&P 100 and other weighted funds, and Jingshun Great Wall NASDAQ Technology Fund.
The term "exploratory heavy holdings" originates from the fact that although fund managers included Intel in their heavy holdings two years later, Intel was among the last few of the top ten heavy holdings among the seven QDII funds mentioned above, and its holdings were all below 5%.
Taking the two largest products among the seven QDIIs as an example, as of the end of December 2023, Guangfa Global Select Fund held 7.52% of NVIDIA's holdings and 5.74% of Chaowei Semiconductor's holdings, but only 4.37% of Intel's holdings. Intel was listed as one of Guangfa Global Select Fund's top ten heavy holdings for the first time in the past four years, while NVIDIA and Chaowei Semiconductor were regulars. The situation of Huaxia Global Technology Pioneer Fund is roughly similar. As of the end of last year, QDII held a high position of 8.72% in NVIDIA and 9.15% in Chaowei Semiconductor. However, when QDII invested heavily in Intel for the first time, the fund manager only gave Intel a 3.66% position.
The difference in closeness between Intel and its competitors is more evident in the distribution of heavy holdings in the Chuangjin Hexin Global Chip Industry Fund. At the end of the fourth quarter of last year, fund managers gave Chaowei Semiconductor a stock position of nearly 10%, and even chip giant Broadcom, which had fewer fund managers, had a position of over 8%. However, fund managers only gave Intel a stock position of 2.84%, which is the weakest holding weight among the top ten heavy holdings.
In fact, Intel has always played the role of a "weak stock" in chip themed funds, and the weight given to Intel by index funds is also extremely limited. In September 2021, in the first periodic report after the establishment of E Fund's S&P Information Technology Fund, Intel was the tenth largest stock in the first ten major equity redistribution of the QDII index, accounting for only 2%. However, just one quarter later, Intel was removed from the core stock pool by the fund manager and replaced by Cisco. After that, Intel once again entered the list of major equity holdings of E Fund's QDII technology index, which is two years later and still has a relatively low weight.
Weak AI chip players may cause funds to remove them from the stock pool
Considering that fund managers have always been disinterested in their heavy holdings of Intel in their historical periodic reports, and there has even been a phenomenon of selling after just buying, Intel's sluggish performance this time may make the company not stay on the QDII fund's heavy holdings list for too long, and some fund managers may even buy back domestic stocks.
"In terms of individual stock adjustments, the guidance on performance expectations of listed companies has become an important factor in individual equity adjustments." Chen Guoguang, manager of Tianhong Global High end Manufacturing QDII Fund, emphasized this in the latest quarterly report. He said that in terms of individual stock investment, companies place more emphasis on technological competition barriers in specific segmented industries and fields, while relatively downplaying short-term valuation factors. In the short term, individual stock performance is affected by various factors. However, from a longer perspective, technological competition barriers are the most important driving force for listed companies to stand out in industry competition and the foundation for companies to obtain better financial returns. Therefore, the technical competition barriers of listed companies in their respective segmented industries and fields are the most important factors to consider when selecting individual stocks for this fund.
Chen Guoguang stated that the specific holding weight also needs to consider the business cycle of segmented industries, such as storage chips, logic chips, and power devices, which are in different inventory cycles and will also affect their stock price performance. As for other factors such as macro environment, geopolitical factors, etc., they are volatility factors that high-end manufacturing companies must bear when investing. As of the end of December 2023, Intel's position in the Tianhong High end Manufacturing Fund was 3.66%, marking the first time the fund has placed Intel in the core stock pool since its establishment.
Liu Yang, Global Chip Fund Manager of Chuangjin Hexin, stated that the global semiconductor industry chain hit bottom at the end of the third quarter of last year, with AI innovation focusing on overseas technology leaders. In the fourth quarter, overseas hard technology saw a significant increase, and AI artificial intelligence leaders achieved record high profits. We are focusing on the core AI and artificial intelligence technology leaders, while also laying out investment opportunities in emerging markets in the new wave of technological innovation and the new semiconductor upward cycle. It is worth mentioning that the global chip QDII fund also increased its position in A-shares in the opposite direction at the end of the fourth quarter of last year, holding over 21% of the total A-share company position.
Li Yaozhu, manager of Guangfa Global Selected Stock Fund, believes that continuing to invest in the artificial intelligence industry, there are five industry trends worth paying attention to in 2024 under the development trend of multimodal artificial intelligence: firstly, SaaS software will have a huge improvement in production efficiency for enterprises and individual users after adding enhanced artificial intelligence capabilities, and related targets will be the first choice for 2024; Secondly, computing power remains a scarce direction, but there will be some changes in the landscape, and customized silicon chips will be the fastest-growing area; Thirdly, the landscape of cloud computing platforms will further change, and cloud platform companies that embrace AI will benefit; Fourthly, in the era of artificial intelligence, network security will be more important than at any time in history, and we are optimistic about this sector in the long term; Fifth, blockchain technology will be used for copyright protection in the era of generative AI and artificial intelligence, and this technology may be significantly utilized. In the early stages of the development of artificial intelligence, opportunities are still enormous, and investment opportunities will be sought in these fields in the future.
Considering that more and more analysts are emphasizing that Intel's role in AI chips is lagging behind, the performance guidance factors that have a significant impact on individual equity may make the stock face the possibility of being called out again in the core stock pool.