A hedge fund management firm says Intel (INTC) is now trading in meme stock territory after securing a $5 billion deal with Nvidia (NVDA).
In a CNBC interview, Gene Munster, co-founder and managing partner at Deepwater Asset Management, says the market’s reaction to Nvidia’s deal with Intel far outweighed the underlying business impact.
Yesterday, INTC skyrocketed and rallied to as high as $33 to print gains of over 30% after news of the multi-billion-dollar deal broke. Munster says the rally is all about hype.
“I think it’s up because it’s a validation. This is a massive validation. If you look at just the fundamentals and the impact to the business, it probably should be up like 5%, maybe 10% today. But this is like an order of a couple of standard deviations outside of that. I do want to remind people that when Oracle ripped, it was up 40%.”
He also believes that the true driver of the surge wasn’t Intel’s fundamentals.
“I do believe also that Intel is almost becoming this meme stock… The impact and what’s driving this, and what was really below the surface, I think the substance of this was an endorsement by NVIDIA to support a decision from the White House… The stock is reacting to that, and I think that kind of plays into this a little
bit of a meme stock.”
Munster notes that while he’s bullish on the AI trade, he questions the sustainability of the INTC rally.
“That is pretty negative, what I’m seeing right there relative to Intel. And I do expect it to trade off. I do want to highlight that I’m still very positive on where AI is going to go. I think it will exceed high expectations. So I’m very much bullish on AI. But I think this in particular is just kind of an entertaining birth of a meme stock.”