Mitch Steves of RBC Capital Wants to Warn You About Intel in Your Portfolio

July 10, 2019

Mitch Steves is an Analyst at RBC Capital Markets primarily focused on networking equipment and semiconductor companies. In 2016 and 2017, he was noted as a “Rising Star of Wall Street Research” according to Institutional Investor magazine in three categories: Telecom & Networking Equipment, Semiconductors and IT Hardware/EMS.

He started at RBC in 2011 and launched coverage in 2015. Earlier, he held positions at Gleacher and Company covering hardware and networking equipment and worked as an investment banker at Cowen and Company.

He holds an economics degree from the University of California Berkeley.

In his 4,885 word interview, exclusively in the Wall Street Transcript, Mr. Steves clearly picks winners for the long term in the semiconductor sector:

“…If you look out, I mean, five, 10 years, there’s no real debate that you’re going to see a lot more spending on AI because it’s kind of an arms race. So whoever wins is going to have all the information to continue expanding their lead. It’s kind of a self-fulfilling prophecy.

But I’d say that the most obvious ones, at least near term, are going to be using AI for self-driving vehicles, using AI for ads as well, being able to figure out what type of ads to show people.

It’s going to be used for consumer purchases as well. So instead of you buying something on Amazon (NASDAQ:AMZN) — let’s say a GPU, for example — and then getting 20 different recommendations for the exact same thing, they’ll have better information in terms of what to sell you in the future.

I think those are two of the most near-term ones, advertising and then secondly self-driving vehicles in the next couple of years.”

His specific recommendations include the bellwethers of the industry:

…I’ll agree and say, “OK, the performance is probably the same, but that doesn’t matter because if your performance is the same, but it cost me tens of millions of dollars more in power consumption because your chip is just consuming too much power, then it doesn’t matter what your performance is.”

You can quite literally give away the Intel chip for free and compare it to an AMD chip, and nobody’s going to take the Intel chip because it just loses that much money over a year. I think that’s where we’re going, and note that Intel could catch up, but as we stand today, we think AMD gains share due to that math.

We’re going to more of an efficient frontier as well in semiconductors. You can’t just be the high-performance, high-power-consumption company.

You have to be essentially high performance plus low power consumption. This favors GPUs, FPGAs and companies on the smallest nodes.”

Get the specific stock recommendations and more of his sector analysis in the complete 4,885 word interview, exclusively in the Wall Street Transcript.