Investors who don’t like uncertainty — and that would be most of them — are getting a taste of what the next few weeks may be like since the surprise reports last week of security vulnerabilities, dubbed Meltdown and Spectre, in most of the world’s microprocessors.
On Tuesday, shares of Advanced Micro Devices Inc. AMD, +1.82% fell nearly 3% after a Microsoft Corp. MSFT, -0.43% software patch design to secure PCs caused AMD-based systems to freeze up. The news came after AMD said last week that there was a “near zero chance” its chips were affected by the design flaw, which could expose private data stored in a chip’s memory to hackers. So far, there have been no hacking incidents reported since the flaws were exposed by three groups of researchers, including a group at Alphabet’s GOOG, -0.84% Google.
Still, investors need to be prepared for a roller-coaster ride in any stocks related to the issue going forward, especially Intel Corp. INTC, -1.38% the dominant maker of microprocessors. The Meltdown vulnerability was described by one group of researchers as impacting only Intel-based systems, and that software patches should mitigate the issues but they will also slow systems down. Spectre, on the other hand, which also impacts AMD- and ARM Holdings-designed chips, has no known total fix. “There is currently no way to know whether a particular code construction is, or is not, safe across today’s processors – much less future designs,” the researchers wrote in their paper on Spectre.
“It’s still early days,” said Bernstein Research analyst Stacy Rasgon on Tuesday. “People are still digging into the problem.” While many analysts on Wall Street so far are backing Intel’s statement that the design issue won’t have a material effect on its financials, Rasgon isn’t so sure. He wrote in a note last week that Intel could potentially face some costs, such as concessions to customers. “We wonder if there might be potential for longer-term concessions necessary, especially to larger cloud customers given performance is likely to take at least some hit,” he wrote.
Already, Intel is under fire for a big stock sale by its chief executive, Brian Kzranich, who sold millions of dollars worth of Intel stock in late November, several months after having learned about the security vulnerabilities. Intel says the stock sale was unrelated to the news of Meltdown and Spectre. Still, the timing looks inappropriate and the company is now facing threats of investigations or lawsuits from at least four law firms seeking to represent shareholders.
The entire tech industry is now working on how to deal with a design flaw written into the heart of computers made in the past 20 years in an effort to make processors work faster. But the biggest arena of impact could be the server market, where fixes could slow down computers, hurting companies like Amazon.com Inc. AMZN, -0.64% Microsoft and others offering cloud services with low latency and fast processing while hosting the data centers of other companies.
There may still be a Pandora’s box of surprises to come, and investors should be prepared.