FBR Capital Talks Intel (Nasdaq:INTC), NVIDIA (Nasdaq:NVDA), AMD (NYSE:AMD)

With Intel (Nasdaq:INTC), NVIDIA (Nasdaq:NVDA) and AMD(NYSE:AMD) generating a lot of interest lately, FBR Capital gave its take on the three tech stocks.

FBR said, "Intel and NVIDIA announced a new patent cross license yesterday after market close, positive for NVDA as it adds -$0.30 to annual EPS, an incremental positive for INTC (despite $0.05 annual EPS hit) as it resolves litigation risks with NVDA for the foreseeable future. While we discuss deal rationale and details below, we note this agreement seems to be another evolutionary step up the value curve for NVDA: it adds three points of margin goodness and has more income for funding future R&D efforts in "Androided" and Windows-based ARM architecture products. NVDA's successes in Quadro (nearly $700M annual high-margin revenues), Tegra (in the best tablets and phones at CES), small, but building, Tesla momentum, and, now, INTC royalty payments have been an impressive run of events over the past couple of years; we commend management's unexpectedly solid performance. For NVDA (MP), given shares' frothy run above $21 after hours (above $20 during the trading day), we think Tegra 2 "mania" and some deal expectations were already embedded into shares at a P/E of 19x (2011 GAAP) and could look to get more constructive near $16–$17. For INTC shares (MP), this deal should be net-neutral. The firm will likely report decent 4Q results and guide for a 14-week 1Q11 that should include some Sandybridge channel-fill benefits. With INTC among the most unloved semiconductor stocks (and a huge 2010 underperformer), any upside goodness could cause some short covering or value buying, potentially setting up a small rally this Friday. Separately, AMD's CEO Dirk Meyer suddenly, unexpectedly resigned Monday. Management is not returning phone calls, but we note the lack of a tablet chip offering, server share loss to INTC, and continued Fusion product delays. As AMD (MP) moves forward without a leader or clear strategic vision (NVDA has created far more value in the past five years than AMD!), shares will likely move lower until clarity is achieved.

"Stock action: NVDA already frothy; AMD likely moving lower; INTC potentially setting up a small rally. For NVDA, given its frothy run above $21 after hours (above $20 during the trading day), we think Tegra 2 "mania" and some deal expectations were already embedded into shares at a P/E of 19x (2011 GAAP) and could get more constructive near $16–$17. For INTC, this deal should be net-neutral. INTC will likely report decent 4Q results and guide a 14-week 1Q11 that should include some Sandybridge channel-fill benefits. With INTC among the most unloved chip sector stocks (a huge 2010 underperformer), any upside goodness could cause short covering or value buying, potentially setting up a small rally this Friday. AMD shares, we think, will move lower near term; we could become constructive near the $6 level."

Intel closed Tuesday at $21.05, gaining $0.36, or 1.74 percent. NVIDIA closed at $20.31, down $0.32, or 1.56 percent. AMD closed at $8.36, down $0.83, or 9.03 percent.