Why Intel Stock Was Such a Dog on Friday

What happened

Once the head of the pack in computer processors, Intel (NASDAQ: INTC) is coming under serious attack in its core business. Rival big tech companies are opting to develop their own chips, with the latest being mighty Microsoft (NASDAQ: MSFT). On Friday’s news that Microsoft is doing the go-it-alone thing, Intel’s stock fell by 6.3% on the day.

So what

In a big “uh-oh” for Intel, various media outlets reported that Microsoft is developing proprietary chips to power the servers that undergird its considerable cloud services. According to Bloomberg, it’s also considering the development of different processors that would be the brains of its Surface line of tablet PCs.

Image source: Getty Images.

This closely follows last month’s news that Apple (NASDAQ: AAPL) is also going proprietary. Apple confirmed this when it formally unveiled its latest offerings in the Mac line, which will eventually be powered by the company’s home-brewed M1 chips.

Both tech giants remain tightly linked to Intel. The company’s processors power a great many PCs with Microsoft’s Windows operating system, to the point where such machines are often identified by the hybrid Wintel nickname. And Intel’s chips have been the guts of Apple’s computers for years, based on long-term agreements between the two companies.

Now what

Intel shareholders are right to be concerned; processors are crucial to the company’s success. While it can probably withstand the looming departure of Apple, Microsoft is a mighty beast that could cause serious damage if it scales up with a proprietary chip.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Microsoft. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.

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