Finimize - 📉 Intel's big bet failed

What’s going on here?

Intel’s next-generation manufacturing process failed its test, calling the tech firm’s know-how into question.

What does this mean?

Intel’s “18A” manufacturing process was supposed to show that old dogs can, in fact, learn new tricks. But despite spending years developing the tech, the American firm is yet to prove the old adage wrong. After checking out semiconductor parts produced by Intel’s machines, chip designer Broadcom has said the process isn’t fit for mass production yet. This is just the latest knock for the legacy tech firm’s confidence. Intel announced a $1.6 billion loss last quarter, stopped its dividend, and predicted 15,000 job cuts – so the stock has been laying low. Plus, the firm had to ditch plans to partner with Softbank on a Nvidia-esque chip, unable to meet the Japanese company’s production demands.

Why should I care?

For markets: Intel’s shooting for Nvidia, but the stars would do.

Good news: the US government approved funding for the Chips Act in March, which would hand Intel almost $20 billion in grants and loans. Bad news: it’ll only be paid out if the firm lives up to lenders’ lofty expectations. So Intel could be left empty-handed if it falls behind, potentially derailing the company’s plans to throw money into infrastructure and development in a bid to catch up to Nvidia.

The bigger picture: You can’t win ‘em all.

Intel’s bigwigs will need to formulate their next steps wisely at this month’s board meeting. See, if the firm cuts costs by scaling back US factories, the Chips Act award would almost certainly be pared back, too. But do nothing, and Intel might not see a cent anyway. This one will be a risky call for investors, not least because it can be years until a recovery strategy is deemed a success or failure. So assessing Intel’s chances may be best left to the industry experts.

What’s going on here?

Investors have put nearly $1 trillion into actively managed exchange-traded funds (ETFs), with the potential of market-beating returns spiking their heart rates.

What does this mean?

Active ETFs are like the regular ones, which track an underlying asset or index, but they’re actively adjusted by fund managers who aim to beat the market’s returns. That’s attracting a ton of time-poor but ambitious investors. As of the end of July, they’d stuffed $974 billion into active ETFs – a somewhat sudden frenzy, given that the funds have been around since 2006 but only hit the $100 billion mark in 2018. It likely helped that investors are flush with options. According to BlackRock, 41% of all new ETF launches in the first half of this year were active ones. And in that time, investors put a record proportion of cash into active ETFs instead of their passive counterparts – just over 22% of the total pie.

Why should I care?

For markets: Don’t kick ‘em while they’re down.

Active ETF managers are getting creative. Just look at the recently launched Deletions ETF, which invests in companies that are cut from major indexes like the S&P 500 and Russell 1000. Yup, cut. The idea is that these companies tend to climb back up the ranks – often even beating their old indexes. So by buying them after they’ve been booted, investors can theoretically bag a bargain.

The bigger picture: Bye, Big Tech.

Swooping up stock market rejects could be a savvy tactic right now. Investors are backing out of ultra-expensive tech stocks, wary of the risk of a serious economic unraveling in the US. Plus, companies that break into major indexes often struggle to live up to their newfound hype – and Big Tech is hardly short of hype. That’s why investors are spreading their bets across a wider range of stocks and sectors, putting some of their money in cheaper stocks instead of heavyweights.