SIGN UP FOR $10 TO UNLOCK ALL ARTICLES! What a comeback! The recent tech rout has caused AEM share price to plummet from $4.60 in February to a low of $3.70 in March. The bearish sentiments for the tech sector are due to investors rotating out of tech into cyclical stocks. Nevertheless, AEM share price stormed back in style on 23 March following news that Intel would reinvest US$20 billion to build two new chip factories in Arizona.
Being a long-time equipment testing supplier of Intel, AEM share price is intricately linked to developments at Intel. Investors would recall that in July 2020, AEM share price suffered meltdown following news of Intel’s announcement of delay in production of 7nm-based CPU for about 6 months.
The recent announcement by the new Intel CEO boosted AEM share price because the US giant is planning to become a manufacturing partner for other chip designers. Previously, Intel has always design and manufacture its own chips. The latest move would see Intel building chips for Amazon, Google, Microsoft and Qualcomm. There are even talks of Intel re-capturing Apple.
Whilst it will probably take 2 to 3 years for the expansion plans to materialize, the medium outlook for AEM share price will be positive. This is because Qualcomm is a major chip supplier for mobile phones while Apple is a lead mobile phone maker. If both of them turn to Intel for chip supply, the demand of Intel chips will soar tremendously given the high volume of mobile phones. With more demand for Intel chips, the demand for back-end testing will increase as well. As a result, AEM’s business stands to benefit from this development.
For Intel, AEM is a key partner because the US chipmaker needs its chips to be tested after production. This is important because the 5G technology used in automobile, industrial and medical equipment are safety critical, so the chips used must be tested to be reliable and functional. Currently, the market is facing a shortage of chips due to supply chain disruptions and competing demands from automobile sector. As a result, chipmakers are ramping up productions to meet the surging demands. Against this backdrop, AEM share price is set for another bull run.
Taking the above into context, my forecast for AEM share price is that it will hit $6 to $7 in the short term. In the long run, this counter could top $10 due to the volume of Intel chips to be tested. In this article, I will share more of my insights on the outlook for AEM share price.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am vested in this counter (holding 2000 AEM shares at $4.50), so my views on AEM (AWX) share price may be biased.
AEM share price in baptism of fire
The management of AEM is known to time its sales guidance, which has a huge bearing on AEM share price movements in recent years. Usually, the sales guidance will be released along with the financial results. However, this time round, the financial guidance for FY2021 is put on hold until the close of the offer for CEI, which should be in 2nd quarter of FY2021. In view of this, the upcoming 1st quarter financial result should be a baptism of fire for AEM share price.
Investors would look to the coming financial results and assess if FY2020 was a one-off anomaly. Last year, AEM share price roared to high heavens on the back of unprecedented demands for computer chips. People were scrambling to buy computers due to global lockdowns, which resulted in prevalent work-from-home arrangements until now. Enterprises also turned to technology for business continuity. However, with global economies now on the path of gradual recovery, investors of AEM would be keen to know if the performance of AEM in 2020 is sustainable.
There were even speculations that AEM share price could collapse following the stepping down of Loke Wai San from Executive Chairman to Non-Executive Chairman effective on 1st January 2021. Nonetheless, I have a differing view. In fact, I believe Loke Wai San’s re-designation will be [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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