Semiconductor Stocks: Winners And Losers After Apple's Bombshell

First, there's the cost savings of not paying Intel $3.4 billion a year for Mac CPUs. Cowen analyst Krish Sankar estimates that alone will add $0.13 a share to Apple's earnings.

I say that's probably too low because it doesn't account for market share gains. The entry-level Macs Apple just introduced represent a tremendous value compared to their Windows-based rivals. And the gap will only grow in the years to come. Mac sales were rising even before the M1, with unit sales up 38.9% in Q3 according to research firm IDC. I expect Mac market share to double over the next two to three years as consumers realize the advantages of the M1. The M1 is just one reason Apple stock still has room to run.

LOSER – Intel Corp.: No semiconductor stock has more to lose from more powerful ARM CPUs than Intel. And it couldn't come at a worse time. Intel has struggled with its manufacturing process and is stuck on 10nm while rival AMD, the only other maker of x86 chips, uses a 7nm process to make its Ryzen CPUs (the M1 uses an even more advanced 5nm process). That's helped AMD eat into Intel's market share. INTC stock is down 23% this year and is up a paltry 3% over the past three years.

Losing Apple as a customer only cost Intel about 4% to 5% of its business – not a death blow by any means. But if other ARM CPU designs get anywhere close to matching the M1's performance – and the chips cost less – PC makers will start ditching Intel as well.

Then there's Intel's lucrative server CPU business. Intel has 95% of that market. For now, ARM chips are no threat to that business. But the M1 suggests a server-capable ARM chip is likely at some point, even if it takes a while. As a chip that uses far less power and produces much less heat, a powerful ARM-based server CPU would deliver huge cost savings to companies that run server farms. And that would be very bad news for Intel.

Intel won't go out of business next year. But its stock will struggle mightily if the firm fails to meet the challenge of ARM-based CPUs.

WINNER – Qualcomm Inc.: In the race to build an ARM-based CPU suitable for the average PC laptop, Qualcomm has a good head start. It's been working with Microsoft for several years to supply a customized ARM-based Snapdragon CPU to power Redmond's Surface Pro laptops. Qualcomm's Snapdragon family also powers about half of the world's Android smartphones.

While the new SQ2 chip is not nearly as powerful as the M1 – its Geekbench 5 scores are about half of the Apple chip's – it exists now. If Qualcomm can crack the performance puzzle, it has at least one eager customer in Microsoft, which continues to put a lot of effort into Windows on ARM.

LOSER – Advanced Micro Devices: While shares of AMD have been doing well (they're up more than 120% over the past 12 months), this chipmaker faces the same threat as Intel. AMD has skillfully exploited Intel's woes to gain ground in the x86 world, but needs to be wary of ARM technology. AMD has dabbled in ARM CPUs (such as its Opteron line) but in recent years has focused more on the x86 Ryzen CPUs. The M1 may force AMD to reconsider allocating more resources to ARM designs. Such a move needs to be made soon, though.

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