Intel shares fall despite cost savings plan. That is why.

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chip maker

Intel

announced positive news on its foundry business on Wednesday as it continues to build new facilities to expand custom chip manufacturing service. Investors still sold the stock.

Intel Foundry Services (symbol: INTC), officially established late last year, is a capital-intensive chip manufacturing company that competes with

Semiconductor manufacturing in Taiwan

Company (TSM) and Samsung Electronics (005930. Korea). The company recently invested billions of dollars to build a semiconductor assembly and test facility in Poland, two factories in Germany and another in Israel.

The question was when Intel would reap the benefits of these investments. Chief Financial Officer David Zinsner informed investors in a webinar Wednesday morning that the third-party chip manufacturing business will play a significant role in reducing costs by $3 billion in 2023. The company also expects to be the second largest foundry next year, generating manufacturing revenue of more than $20 billion.

Intel also announced on Wednesday an agreement to sell a minority stake in the IMS Nanofabrication business, an Austria-based technology provider that supports the creation of semiconductors.

The stock nonetheless fell 6% to $32.90 on Wednesday. The S&P 500 lost 0.5% while the Nasdaq Composite fell 1.2%

Push the blame onto the wider market. Intel wasn’t the only chipmaker stock to be hit on Wednesday.

Advanced micro-systems

(AMD) fell 5.7% while

Nvidia

(NVDA) and

Qualcomm

(QCOMM) were down 1.7% and 3.4%, respectively. THE

PHLX Semiconductor Index
(SOX) fell 2.7%.

The sale comes after strong gains by semiconductor companies this year. Nvidia, in particular, is up nearly 200% this year and is trading at a valuation of 52.3x expected earnings per share over the next 12 months, compared to its five-year average of 39.4x. . Even after Wednesday’s drop, Intel is up 24% this year.

Investors could sell to lock in profits, or in response to Federal Reserve Chairman Jerome Powell’s word that further interest rate hikes are on the way, which would be bad news for US stocks. growth. “Given how far we’ve come, it may make sense to raise rates, but do so at a more moderate pace,” Powell told lawmakers on Wednesday. “That’s really it.”

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.