Intel(NASDAQ: INTC) stock is falling in Monday's trading. The semiconductor company's share price was down 2% as of 11 a.m. ET, according to data from S&P Global Market Intelligence. It had been down as much as 4.7% earlier in the day's trading.
Intel stock is losing ground today following news that China is making moves to ban the use of its central processing units (CPUs) and other chips in government computers. According to a report from The Financial Times, which broke the news on Sunday, Chinese government agencies ranking above the township level will be barred from using the company's processors in their systems. The new guidelines also prohibit the use of CPUs from Advanced Micro Devices.
Intel stock is pulling back as China pivots
In response to rising tensions with the U.S. and other Western countries, China is aiming to minimize its reliance on imported technologies. The country likely sees the use of chips from Intel and AMD as a national security risk. In addition to this concern, barring the usage of nondomestic processors in government computers and servers will also promote the development and adoption of locally produced alternatives.
What comes next for Intel stock?
China is a massive market for computers, and the possibility of its being completely banned from selling its processors in the country could put a meaningful dent in Intel's sales. While there's currently no indication that the Chinese government will implement a more far-reaching ban on computers and systems using the company's technologies, it's not surprising that investors are reacting negatively to the news today.
On the other hand, rising tensions between the U.S. and China have also opened the door for Intel to become a much more important player in the chip fabrication space. Because of the complicated geopolitical relationship between China and Taiwan, strategists and economists are worried about the possibility that the rest of the world could be cut off from chips by Taiwan Semiconductor Manufacturing -- the world's leading contract chip fabricator.
As a result, the U.S. and other countries have been investing in Intel to help boost the company's chip fabrication capabilities. While the stock is pulling back today, the tense situation with China could actually be a bullish long-term catalyst for the stock.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
