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In our June 3 post, we concluded that the resurgent Intel Corporation (INTC), which had weathered back-to-back quarterly losses amid softening PC demand, consequent surplus inventory, and realignment toward GPU-heavy and AI-centered enterprise demand, could be worth more than what was being suggested by its market price at that time.
By announcing its return to profitability during last week’s earnings release, the pioneer of modern computing lived up to our expectations while exceeding the ones on the Street. INTC posted a net income of $1.5 billion, compared to a net loss of $454 million during the previous-year quarter. Its adjusted EPS came in at $0.13 compared to an adjusted loss of $0.3 per share expected by Wall Street.
While the Market greeted the news with a 7% surge in the stock price in extended trading and a further 5% gain the following morning, INTC’s revenue, despite exceeding low expectations, declined 15.7% year-over-year to $12.9 billion, marking the sixth consecutive quarter of sales decline.In view of a subdued topline, much of the outperformance in the quarterly results can be attributed to the progress INTC had made in cutting $3 billion in costs this year.
In addition to exiting nine lines of business since CEO Pat Gelsinger rejoined INTC to achieve a combined annual savings of more than $1.7 billion, the company slashed its dividend and announced plans to save $10 billion per year by 2025, including through layoffs.
With INTC’s cloud computing group, which includes the company’s laptop and desktop processor shipments, and server chip division, which is reported as Data Center and AI, reporting year-over-year declines of 12% and 15%, respectively, Pat Gelsinger forecasted “persistent weakness” in all segments of its business through year-end, and that server chip sales won’t recover until the fourth quarter.
With upside through cost optimization capped and customers prioritizing GPUs over CPUs to handle ever-increasing AI/ML workloads, INTC is eager to join the race currently being led by NVIDIA Corporation (NVDA) and Advanced Micro Devices, Inc. (AMD). The company is working on the manufacturing front, for which it significantly depends on Taiwan Semiconductor Manufacturing Company Ltd. (TSM).
By doubling down on the fab business, INTC aims to match TSM’s chip-manufacturing capabilities by 2026, enabling it to bid to make the most advanced mobile processors for other companies, a strategy the company calls “five nodes in four years.”
To that end, INTC is pursuing an aggressive IDM 2.0 road map with new manufacturing facilities in Oregon, New Mexico, Arizona, Ireland, and Israel in the pipeline to augment the capabilities of 15 fabs worldwide and facilities to assemble and test the manufactured chips in Vietnam, Malaysia, Costa Rica, China, and the U.S.
Among those, Arizona’s new facilities would be manufacturing chips for the company and customers such as Amazon, Qualcomm, and others as part of Intel Foundry Services. While the company still depends on TSMC for 5nm chips used for AI applications, it aims to take a quantum leap in that direction with even smaller 18 A chips.
While companies such as Amazon.com, Inc. (AMZN) are resorting to chips designed in-house to support their cloud infrastructure, INTC, in addition to being the manufacturer of both wafers and packaging of AI accelerators, is also present with its Gaudi chips.
The company’s efforts are also receiving much-needed political encouragement in the form of the Chips and Science Act, which is aimed at on-shoring and de-risking semiconductor manufacturing in the interest of national security.
Recently, Pat and his team at INTC upped the ante by unveiling its new ambitious plans to incorporate AI into every product it creates. This announcement comes as the company’s upcoming Meteor Lake chips are rumored to feature a built-in neural processor specifically designed for handling machine learning tasks.
With an objective to “democratize AI,” Pat was loud and clear about INTC’s plans to make it a ubiquitous and integral feature of its products designed to cater to all segments of the computing ecosystem, including “at the edge in the Client, in the enterprise, as well as in the cloud.”The upbeat CEO forecasted that AI would permeate all business domains, including the client-facing consumer electronics market, enterprise data centers, and even manufacturing, and make its way into personal devices, such as hearing aids and personal computers. AI is already present as a co-pilot for Windows 11, allowing users to type questions and perform specific actions, and it could play a significant role in the next iteration of Windows.
Bottom Line
For the third quarter of the fiscal, INTC expects adjusted earnings of 20 cents per share on $13.4 billion revenue at the midpoint.Whether or not INTC manages to meet or exceed the above target could go a long way in helping investors determine if its ambitious turnaround is on track to restore the company to its former glory.

Last week, at the Amazon Web Services (AWS) Summit in New York, San Francisco-based cloud communication and customer engagement platform Twilio Inc. (TWLO) announced its strategic partnership with technology giant Amazon.com, Inc. (AMZN). Right on cue, the market welcomed the announcement with more than a 5% intraday gain in the former’s share price while surging by as much as 11.7% during the trading session.
The Partner
As a dominant player in the CPaaS (Communications-Platform-as-a-Service) market, TWLO provides businesses with the tools to integrate voice calls, text messages, and security verification tools into their software and apps to drive customer engagement by facilitating seamless and personalized interactions on demand. This empowers businesses to expand their customer base and communicate with clients across the globe.
While potential growth avenues for TWLO include expanding its CPaaS offerings and forging partnerships with other major tech companies, competition from established tech giants could impact the company’s operations and revenue generation. However, that concern seems to have been mitigated by TWLO’s artificial intelligence (AI)-fueled strategic partnership with AMZN.
The Partnership
The renewal of vows and strengthening of ties, which seeks to enhance the company’s predictive AI proficiency, has closely followed a vote of confidence from the tech giant in which AMZN announced that it has acquired 1% stake in TWLO earlier in the week with its ownership of 1.77 million shares worth more than $108 million.
The association between the two businesses started back in 2016 when TWLO began serving as a Marketplace partner for AWS, which had become the world’s largest cloud infrastructure platform. It signed two deals with AMZN to directly integrate its communication tools into AWS, which enabled developers to easily add TWLO’s voice calls, text messages, audio clips, and other features to their mobile apps.
Fast forward to June 2022, and TWLO revealed its CustomerAI, which adds a technology layer that integrates generative AI and predictive AI tools into the company’s customer engagement platform.
According to Twilio CEO Jeff Lawson, who was employed with AMZN between 2004 and 2005, “With generative and predictive intelligence, Twilio’s high-quality interaction data, and Segment profiles working together, every experience can be highly personalized and tuned with a level of sophistication that was previously only attainable by the tech giants. With Twilio CustomerAI, brands can transform their customer relationships and unlock their full potential.”
The Heavyweight
Coincidentally, also in June 2023, AWS, in response to the recent noise around AI being made by frontrunner Microsoft Corporation (MSFT) and challenger Alphabet Inc. – Class A (GOOGL), announced an allocation of $100 million for a center to help companies use generative AI. This technology has captivated the public imagination and shaped the business narrative since OpenAI unleashed ChatGPT.
While $100 million might be an apparent drop in the bucket for a company with $64 billion in cash and half a trillion dollars a year in operating expenses, the investment acknowledges the significance of generative AI and the importance of being a part of the conversation.AWS CEO Adam Selipsky insists that the AI trend is real. For AMZN, that momentum applies to its Bedrock generative AI service and its Titan models, as well as the new innovation center.
While it might seem that the company, which got a head start of no less than seven years over MSFT and GOOGL in the business of renting out servers and data storage to companies and other organizations, might be late to the generative AI game, Selipsky, echoing Amazon founder and longtime CEO Jeff Bezos, said the company has succeeded by listening to customers.
In fact, AMZN’s leadership in the cloud infrastructure market could give the company heft and mileage in the generative AI race. “AI is going to be this next wave of innovation in the cloud,” Selipsky said. “It’s going to be the next big thing that pushes even more customers to want to be in the cloud. Really, you need the cloud for generative AI.”
Moreover, according to Selipsky, AWS provides a measure of credibility in offering generative AI that eludes others in the space. He emphasized, “I can’t tell you how many Fortune 500 companies I’ve talked to who banned ChatGPT in the enterprise. Because at least the initial versions of it just didn’t have that concept of enterprise security.”
Bottom line
TWLO Senior Director of Product Alex Millet expressed his optimism around the company’s partnership with AMZN, “With AWS’ predictive AI technologies, we are rapidly developing AI-native features and APIs.” He further added, “We believe our tools will change the way marketers, contact centers, developers, and data teams deliver these world-class customer experiences.”
Hence, while the OpenAI-MSFT alliance is garnering attention and reaping the first-mover advantage with GOOGL scrambling to play catchup, the coalition of AMZN and TWLO has the potential to emerge as the dark horse in what AWS CEO has termed as a “10K race.”

Last week, in line with broad expectations on the Street, Federal Reserve Chair Jerome Powell announced the unanimous decision by the FOMC to raise key interest rates by another 25 bps. With this move, the central bank has raised the benchmark borrowing cost to 5.25%-5.50%, ratcheting it up from nearly 0% in about 16 months.
With a 2.6% rise in inflation, down from a 4.1% rise in Q1 and well below the estimate for an increase of 3.2%, and an annualized increase of 2.4% in the gross domestic product in the second quarter, topping the 2% estimate, there is increasing belief in the Market that Jerome Powell and his team at the Federal Reserve may be on the cusp of achieving the elusive “soft landing.”
In Mr. Powell’s words, “The staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession.”
However, ECB raised interest rates by a quarter percentage point shortly after, citing persistent inflation. In such a scenario, despite increased optimism, businesses are expected to remain weighed down by high borrowing costs, and economic activity is expected to remain stifled due to relatively scarce credit.
Hence, there is still a significant probability that in order to overcompensate for the infamous “transitory” call that caused the Fed to arrive (really) late in its fight against demand-driven inflation, the central bank may be sowing the seeds of economic stagflation.
Moreover, with every increase in benchmark interest rates, a selloff of long-duration fixed-income instruments, such as the 10-year treasury notes, gets triggered, which causes a slump in their market value and a consequent increase in their yields. This also increases the benchmark 30-year mortgage rates, thereby depressing demand and deepening the crisis in which real estate has lately been finding itself.
After benchmark 10-year yields jumped by as much as 15 basis points above the key 4% level, Peter Schiff, CEO and chief economist at Euro Pacific Asset Management, warned of a crash in Treasuries. He has also predicted the benchmark 30-year mortgage rates to soon hit 8%, a level last seen in 2000.Mr. Schiff’s apprehensions have also been echoed by David Rubenstein, co-founder of The Carlyle Group, who expressed his concern regarding the fate of commercial real estate as millions of people stay home and companies try to figure out what to do with empty offices.
An increase in borrowing costs would not just raise the cost of servicing the $32.7 trillion national debt; significant markdowns prices of legacy bonds and an inability by borrowers to service them due to economic slowdown could crush the loan portfolios of struggling banks and make them go the way of the dodo, such as the Silicon Valley Bank and the First Republic Bank.
With the Bank of Japan’s policy tweak of loosening its yield curve control sparking widespread shock in the markets that have been teetering on the brink of collapse, there is a material risk that an apparently resilient economy could find itself regressing into a full-blown recession just as Jerome Powell’s colleagues at the Federal Reserve have stopped forecasting it.
With HSBC Asset Management’s warning that a U.S. recession is coming this year, with Europe to follow in 2024, gaining credibility with each passing day, investors increasing their stakes in fundamentally strong businesses could be a time-tested method to navigate Mr. Market’s wild mood swings between unbridled euphoria and manic depression.
Here are a few stocks that are worth considering amid this backdrop:
Apple Inc. (AAPL)
According to a recent note from Fairlead Strategies, the technology and consumer electronics giant could witness a major upside in its stock. According to the agency, the stock could jump to $254 by the end of 2024.
AAPL, which has a history of revolutionizing products like the personal computer, smartphone, and tablet, has begun scripting the next key chapter in its success story with the announcement of its first product in the AR/VR market, the Apple Vision headset, which will sell for $3,499 when it is released early next year.
Regardless of any near-term and temporary softness and slowdown, a compounding machine such as AAPL, which boasts a sticky user base with a retention rate of over 90%, assures the company of adequate cash flow through repeat purchases and upgrades.
Moreover, AAPL’s board authorized $90 billion in share repurchases and dividends. It spent $23 billion in buybacks and dividends in the March quarter and raised its dividend by 4% to 24 cents per share.
Through relentless share repurchases, AAPL increased the existing shareholders’ stake by decreasing its float, thereby increasing the remaining shares’ intrinsic value (and consequently the price) without a proportional rise in market capitalization.
Johnson & Johnson (JNJ)
JNJ has been around for 135 years and is a worldwide researcher, developer, manufacturer, and seller of various healthcare products. The company operates through three segments: Consumer Health; Pharmaceuticals; and MedTech.
Over the past three years, which have been turbulent, to say the least, JNJ’s revenue has grown at a 6.7% CAGR. During the same period, the company also registered EBITDA and total asset growth of 7.7% and 8.1%, respectively.
Despite flagging sales of Covid 19 Vaccines, JNJ’s reported sales during the fiscal year 2023 second quarter increased by 6.3% year-over-year to $25.53 billion. During the same period, the company’s adjusted net earnings increased by 6.5% and 8.1% year-over-year to $7.36 billion and $2.80 per share, respectively.
In addition to its robust financials, the relative immunity of its demand and margins to potential economic downturns make it an attractive investment option for solid risk-adjusted returns.
Walmart Inc. (WMT)
In a previous discussion, we deliberated on how, despite inflationary pressures and online retail altering brick-and-mortar stores in today’s economy, budget retailers, such as WMT, have been relatively immune to the seismic shifts in the consumption ecosystem.
In fact, WMT has attracted new and more frequent shoppers, including younger and wealthier customers, who are turning to Walmart for both convenience and value. Consequently, according to its earnings release for the first quarter of the fiscal year 2024, the big-box retailer surpassed expectations for both earnings and revenue, with sales rising by nearly 8%.
Encouraged by the strong performance, WMT also raised its full-year guidance. It anticipates consolidated net sales to rise about 3.5% in the fiscal year. It expects adjusted earnings per share for the full year will be between $6.10 and $6.20.
WMT’s sales have reflected the shift toward groceries and essentials, with the former accounting for nearly 60% of the annual U.S. sales for the nation’s largest grocer. In fact, WMT’s grocery business helped to offset weaker sales of clothing and electronics, as sales of general merchandise in the U.S. declined mid-single-digits, while sales of food and consumables increased low double-digits.
Another bright spot for the retail giant has been growth in online sales, which jumped 27% and 19% year-over-year for Walmart U.S. and Sam’s Club, respectively. According to Rainey, curbside pickup and home delivery of online purchases fueled the growth.
Far from being complacent, WMT has been doubling down on initiatives, such as reducing and optimizing packaging and leveraging AI/ML to increase the efficiency of its operations.
Duke Energy Corporation (DUK)
As an energy company, DUK operates through two segments: Electric Utilities and Infrastructure (EU&I) and Gas Utilities and Infrastructure (GU&I).Over the past three years, DUK’s revenue increased at a 5.4% CAGR, while its EBITDA has increased by 4.2% CAGR over the same time horizon.
On July 13, DUK announced its quarterly cash dividend of $1.025 per share of common stock, an increase of $0.02, and $359.375 per share on its Series A preferred stock, equivalent to $0.359375 per depositary share, payable on Sept.18, 2023, to shareholders of record at the close of business on Aug.18, 2023.
DUK currently pays $4.10 per share of common stock as annual dividends, which have grown for the past 11 years and at 2.5% CAGR over the past five years. Through the consistent return of capital, DUK provides adequate income generation opportunities for investors to help them tide over economic uncertainty.On July 6, at Amazon Air Hub, DUK unveils Kentucky’s largest utility-scale rooftop solar site, consisting of over 5,600 photovoltaic panels. It will feed up to 2 megawatts of solar power directly onto the electric distribution grid.
Utility companies such as DUK provide essential services that remain relevant and in demand regardless of economic inconsistencies.