Pouncing on AI’s resurgence: Bold bets on this chipmaker.

• Intel has introduced a new AI chip, Gaudi3, signaling its intention to compete aggressively against rivals like AMD and Nvidia.
• Despite initial positive investor response to the news, speculators expect a more substantial market movement in Intel’s favor as its position as a significant AI player solidifies.
• An aggressive strategy of betting on Intel’s recovery is proposed using options, specifically, a risk reversal strategy.
• This strategy could provide a smart way to profit as Intel stakes a claim in the AI industry, provided investors are prepared for the risk involved.

Intel has recently unveiled its new AI chip, Gaudi3 in a bid to become a significant player in the AI industry. The move sets Intel in direct competition with major player Nvidia, with Intel CEO Pat Gelsinger stating Intel’s new AI chip surpasses Nvidia’s H100. In response to the news, Intel shares shot up by 5%, although they later settled around 1% up.

Intel has been refocusing its efforts on AI for some time. The company’s new chips have been in development since its acquisition of chip developer Habana Labs in 2019. Despite the initial market response, some believe that Intel’s shares are likely to see further gains as the market comes to appreciate the company’s potential in the AI industry.

For those interested in investing in Intel, an aggressive investment strategy is proposed. This involves using options to bet on Intel gaining ground in the AI industry, specifically, a risk reversal strategy. This strategy entails buying an out-of-the-money call and selling an out-of-the-money put, effectively creating a bullish position for the investor.

If successful and Intel’s shares rise significantly, the short put will become worthless, and the long call will increase in value, providing a sizable profit. However, the strategy also involves substantial risk. If incorrect in their prediction, the investor must buy Intel at the short put strike price minus the premium collected. During these transactions, the investor collects credits, and the shares of Intel are essentially bought at a discount to the then-current market price.

While a risk reversal strategy is potentially profitable, it is considered risky and could result in substantial losses. Investors should ensure they thoroughly understand the strategy and its associated risks before proceeding.