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Intel Slips On Microsoft's Plans to Make Its Own Chips

Intel fell Friday after Microsoft said it's working on in-house processor designs to use in its servers.

Shares of Intel  (INTC) - Get Intel Corporation Report dropped Friday after software giant Microsoft  (MSFT) - Get Microsoft Corporation Report said it is working on making its own processors to use in its servers that run the company’s cloud services.

Shares of the Santa Clara, Calif., chipmaker fell 6.30% to $47.46 on Friday, while shares of Microsoft dipped 0.38% to $218.59.

Microsoft is working with UK-based semiconductor and design firm Arm Ltd. to produce a processor that will be used in its data centers, Bloomberg reported.

Microsoft is also exploring using another chip that would power some of its Surface laptop computers.

On Friday, Morgan Stanley analyst Keith Weiss named Microsoft a top pick for next year and increased his price target on the stock to $260 from $249.

He has an overweight rating on the stock.

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“With tough near-term comparisons already in consensus estimates, and the multiple having pulled back to 26 times [estimated] 2022 calendar year EPS, we see potential for outperformance in fiscal year 2021 [ending June 30],” Weiss wrote in a commentary. 

“The durability of growth and margin expansion are underappreciated,” Weiss added.

Separately, two weeks ago, iPhone giant Apple  (AAPL) - Get Apple Inc. Report said that it aims to introduce its latest series of microchips, which it designed in-house, as early as spring next year. 

The new Apple chips are expected to outpace the performance of the latest machines running on Intel's hardware, Bloomberg had earlier reported.

This new chip would succeed the M1. Apple's custom M1 chip for its Mac lineup was unveiled in November with promises of improved power and improvements to its next-generation MacBook Air, Mac mini and MacBook Pro products.

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