WinTel Cracks Apart Again

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Here's a split you don't see every day.

Intel (NASDAQ: INTC  ) is the best performer on the Dow (DJINDICES: ^DJI  ) today. The stock surged as much as 3.2% overnight. The overall Dow is up, but only by 0.79% as of 1:45 p.m. EDT. That's not just a small victory for Intel but a single-day smackdown.

And who's the biggest Dow loser today? That's longtime Intel partner Microsoft (NASDAQ: MSFT  ) . Redmond's shares plunged as much as 2.4% overnight. Among the 30 Dow stocks, no other ticker has tumbled more than 0.8%.

Image source: Intel and Microsoft, plus some light editing.

Intel and Microsoft tend to walk hand in hand across Wall Street. Intel's processor sales depend on Microsoft's Windows operating system in a big way, and vice versa. What's good for the software goose tends to be good for the hardware gander, and so on.

But not today. Instead, market forces are separating the power couple. So what's behind this highly unusual trading split today?

The divergent paths look even more confusing in the light of one recent rumor, which puts Intel's mobile Haswell chips inside the next Microsoft Surface tablet. That tidbit made the rounds today, and it should help or hurt both companies equally, right?

Unfortunately, Microsoft's first Surface tablets have been huge busts in the tablet market, so it's hard to get excited about the sequel's chances. And for Intel, even a small tablet victory counts as a big deal, because the company really hasn't penetrated the mobile market at all yet. So this tablet rumor may actually have helped push the two stocks apart today.

In other news, Intel just released a batch of high-powered technologies for the data center. The update ranges from microserver chips aimed at cloud-computing workloads to extremely power-efficient processors for embedded systems, and it includes a brand-new fiber-optic rack architecture.

The market-moving importance of these new products is confirmed by smaller rival Advanced Micro Devices (NYSE: AMD  ) , whose shares lagged far behind today's rampant market gains, and even larger jumps in the tech sector. AMD used to give Intel a real fight in the data center and hopes to do so again, but Intel just added serious firepower to its server systems arsenal.

What about the Microsoft connection? Sure, you can install Windows on these systems, and Windows platforms account for about half of the server market today. But open-source Linux alternatives have grabbed a 23% market share and continue to grow like bamboo shoots, while Windows server sales are plummeting. And it's hard to see how Intel's new low-power, highly clustered solutions would benefit Microsoft more than Linux vendors, given that Linux systems tend to excel in exactly these kinds of workloads.

So that's another wedge driving Intel and Microsoft further apart.

Finally, investors are still mulling over the impact of Microsoft's huge bet on Nokia (NYSE: NOK  ) . The company is buying the mobile-computing division from the Finnish smartphone-maker for $7.2 billion, and it could be a watershed moment in Microsoft's mobile efforts. Or it could be a huge bust with billion-dollar writedowns to follow in a year or two, if the Nokia bet doesn't pan out.

Microsoft investors are not holding out much hope for a positive outcome. Microsoft lost $13 billion in market cap value on Monday, which is almost double the amount being invested in Nokia. Today, downward pressure on Microsoft shares grew as analysts heaped on downgrades and scathing analyses of the stock.

None of this bad news for Microsoft affects Intel.

Two tech giants are walking in different directions -- not just today, but in their overall strategies as well. Redmond is betting the farm on mobility; Intel tosses a few chips in that direction but goes all in on dominating servers.

Microsoft and Intel are fighting hard to stay relevant in the rapidly changing tech sector. The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. To find out which of these giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate, and we'll give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!


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