"Chip Giants" Reshaping Trading Logic with Fierce Growth: Under the pressure of the AI bull market, equity dilution is not worth mentioning.

In the global stock market, the issuance of new shares or a high-level offering is usually seen by investors as a signal of a shift from bullish to bearish sentiment, as shareholder equity is diluted. However, in this unprecedented global boom in artificial intelligence investment, this traditional logic has been completely overturned, as the chip giants Intel Corporation and AMD have achieved significant stock price increases despite facing dilution and dilution of equity. Take a look at the American tech giant Intel Corporation (INTC.US). Since early August, this chip manufacturer, which has been continuously losing money, has initiated a capital market action to sell a total of $18 billion worth of shares to the US government, SoftBank Group Corp, and long-time competitor NVIDIA Corporation. Its stock price has skyrocketed by nearly 90%, highlighting the global funds enthusiasm for NVIDIA Corporation, AMD, and Intel Corporation under the AI investment boom. These transactions aim to strengthen Intel Corporation's weak balance sheet with fresh capital. According to institutional estimates, these new shares will "dilute" the value of existing Intel Corporation shareholders' equity by about 14%. If the stock warrants held by the US government are exercised under certain conditions, Intel Corporation shareholders may face even greater dilution. However, at present, investors are more enthusiastic about the "significant breathing space" represented by the governments cash than about the dilution of individual stock values. Recently, the prices of high-performance storage products in the global DRAM and NAND series have surged, coupled with OpenAI, the world's most valuable AI startup, reaching a transaction exceeding $1 trillion in AI computing power infrastructure, and "chip manufacturing king" Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR announcing incredibly strong results and raising its 2025 revenue growth forecast to the mid-30s. This has significantly strengthened the long-term bullish narrative of the AI computing infrastructure sector, including AI GPUs, ASICs, HBM, data center SSD storage systems, liquid cooling systems, core power equipment, and other AI computing infrastructure segments. The demand for AI computing power brought by generative AI applications and AI intelligent agents is expected to drive exponential growth in the AI computing infrastructure market, with the potential to reach a scale of 2 to 3 trillion dollars under the unprecedented "AI computing power demand storm". As the earnings season kicks off on Wall Street, the impressive performance of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR and ASML Holding NV ADR will undoubtedly strengthen the "long-term bull market" narrative of the global stock market and the "AI investment faith" of tech believers. This also means that the ongoing "super bull market trend" led by NVIDIA Corporation, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, Broadcom Inc., and Micron Technology, Inc. dominating the global AI computing power industry chain is far from over, and this industry chain will remain the most favored investment sector globally for some time. Equity offerings and warrant trading have completely ignited the valuation of the chip giants "Investors are including all these existing or potential positives in advance and largely downplaying the actual costs there is significant dilution space associated with all of these stock sales," said Michael Bailey, research director at Fulton Breakefield Broenniman, which manages $2.3 billion in assets. "It's a situation of pros and cons. But investors are betting that the pros outweigh the cons." As Intel Corporation investors face dilution in a wave of stock sales, about 14 cents of every dollar of profit earned will belong to SoftBank, the US government, and NVIDIA Corporation, which hold shares. AMD, a long-time competitor of NVIDIA Corporation and Intel Corporation, is also facing a similar situation. The chip giant recently signed an agreement with AI leader OpenAI on October 6, which could bring in billions of dollars in revenue in the near future. In exchange, AMD granted this ChatGPT operator stock warrants at specific stock price milestones. Despite the fact that AMD's future earnings will be lower if the bet placed by OpenAI is successful, AMD's stock price has skyrocketed by 43% in the three trading days following the announcement. The mathematics behind equity dilution is simple: buying a stock of a company essentially equates to owning a theoretical slice of its profits, which is reflected in earnings per share (EPS). When new shares are issued, the profits do not change, but the portion allocated to each share becomes smaller. This is in stark contrast to stock buybacks, which usually drive stock prices significantly higher because, after the reduction in outstanding shares, investors have a larger claim to profits. Of course, selling shares will bring in a massive amount of cash in the short term this is almost the entire intention of Intel Corporation's management. The company is currently in an expensive phase of expanding its chip factories, trying to transform into a contract chip manufacturer similar to Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US). The problem lies in the fact that Intel Corporation may need to do more, as the capital it is raising is only the equivalent of more than half of the funds needed to build a large chip manufacturing plant. This may also be why the company reportedly approached one of its customers, Apple Inc., at the end of last month seeking investments. The report led Intel Corporation's stock price to rise by 21% in the three trading days following. For investors, the core logic behind a bullish Intel Corporation revolves around the strong cash flow brought in by the US government and the $5 billion investment and stake taken by NVIDIA Corporation in Intel Corporation, paving the way for NVIDIA Corporation and its long-time rival Intel Corporation to forge ahead together and reshape the landscape of PC and data center development. Especially, NVIDIA Corporation's plans to expand its AI PC layout may leverage its strongest x86 architecture ecosystem on the PC end to penetrate the high-demand "edge AI field" of AI PCs, bringing in new revenue growth for NVIDIA Corporation, while Intel Corporation may leverage NVIDIA Corporation to reach the most central position in the AI core race. In terms of NVIDIA Corporation's current core revenue-generating business - the data center (DC) business, NVIDIA Corporation's NVLink connects x86 architecture + GPU, introducing a new AI computing power integration system of "customized x86 architecture CPU + NVIDIA Corporation AI GPU + CUDA acceleration platform," coordinating "CPU + GPU" synergies, which will undoubtedly give NVIDIA Corporation more say in the architecture construction of cloud computing companies/supercomputers/enterprise DCs. The two companies will "seamlessly connect" their architectures, with Intel Corporation developing a custom x86 CPU for NVIDIA Corporation and integrating it into NVIDIA Corporation's AI computing infrastructure platform. The core of this approach is to use the NVLink bandwidth/interface and architectural consistency advantages in the x86 architecture CPU + NVIDIA Corporation Blackwell/ future Rubin AI GPU high-speed coupling, targeting the system-level bottlenecks of large-scale model training/inference and focusing on a more complete "whole-machine-level/AI computing cluster platform" solution; Intel Corporation, on the other hand, enters the AI infrastructure "golden growth zone" with its core architecture ecology of x86 architecture (non-contract) in data centers. Something is better than nothing "For shareholders, I think the calculation is: would you rather own 80% or 70% of something, or nothing at all?" said Jay Goldberg, a senior analyst at Seaport Global, who recently upgraded Intel Corporation's stock rating from "sell" to "neutral." "There is a lot of concern surrounding how Intel Corporation will survive. They urgently need capital and new sales channels, and investors are willing to accept this kind of dilution because it is a path to save the company." On the other hand, the massive financing surrounding AI may also mask more severe issues that companies may be facing. For example, Intel Corporation needs to attract a customer base for its contract manufacturing business, and any rise driven by equity sales or deep collaboration with NVIDIA Corporation is "unsustainable" until this happens, wrote Frank Lee, a stock analyst at HSBC, in a report last Monday downgrading Intel Corporation to the equivalent of a "sell". In contrast to Intel Corporation, AMD's situation is different. The chip giant has seen rapid growth in performance in recent years its net profit in the most recent quarter more than doubled to $872 million, while revenue jumped 32% to $7.7 billion. However, compared to industry leader NVIDIA Corporation, the company holds only a small share in the AI GPU market for massive AI training/inference workloads. HSBC reiterated its "buy" rating on AMD (AMD.US), a long-time competitor of NVIDIA Corporation, in its latest bullish research report, and raised its target price significantly from $185 to $310, the highest target price level on Wall Street. Analyst Lee wrote that the recent deal between the company and OpenAI "presents a more favorable bullish picture," enhancing performance forecasts and market bullish sentiment. He also added, "There may be further upside potential from premium pricing and additional AI GPU shipment expansion." As of Tuesday's close, AMD's stock price has risen by 35% since October and by over 80% year-to-date. Therefore, the deal with OpenAI is a major victory for AMD in its data center AI GPU business. However, the warrants include an unusual "twist." If specific financial and stock price milestones are met, OpenAI will have the right to purchase up to 160 million shares of AMD stock at a price of one cent per share, about 10% of its outstanding shares. These warrants will vest in stages, with phased conditions related to the deployment of AMD's AI GPU infrastructure. AMD has disclosed only the conditions for the final tranche of warrants: the final tranche of warrants at a stock price of $600 where the company's market value will reach $1 trillion. This deal comes weeks after NVIDIA Corporation agreed to invest up to approximately $100 billion in OpenAI. OpenAI is embarking on several large-scale AI data center constructions, using not only NVIDIA Corporation's AI GPU computing power cluster but also an AI ASIC cluster developed in collaboration with Broadcom Inc. and AMD AI GPU. However, OpenAI has not yet turned a profit, and these types of financing arrangements bring to mind the typical characteristics of the internet bubble era deals between loss-making companies that make growth appear stronger than it actually is. "There is this unusual 'circular financing' happening here, where these tech companies are looking for creative ways to achieve stronger growth," Bailey from Fulton Breakefield Broenniman said. "Investors are doing the math, and currently they are comfortable with this arrangement. But looking back at Wall Street history, this is unusual."