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Intel a Flawed Trade?

The Fast traders suggest closely watching the action in chip stocks after Intel found a defect in one of its microprocessors.

Although the company said on Monday it is fixing the problem, it stopped shipments of the chip, which is used in PCs with its most advanced Sandy Bridge line of chips. Intel expects the total cost to repair and replace the chip to be about $700 million.

Investors largely view the design flaw as a distraction and not a serious challenge to share price. But the timing couldn’t be worse.

Intel is facing a major challenge from the exploding popularity of mobile devices, a market dominated by Britain's ARM Holdings.

While Intel's processors are the brains in 80 percent of the world's PCs, the company has yet to make its mark in mobile gadgets that are increasingly used surf the Web, manage email and perform other tasks once exclusively the province of PCs.

How should you position now?

"I'd ask myself if there's been a thesis break," says Anthony Scaramucci. "In other words, is there something wrong with the story long-term?" Scaramucci doesn't think so. He believes Intel is still well positioned as a bullish play on the growing use of computers in the emerging world. "I’m a buyer on pullbacks," he says.

*Check out our entire conversation with Scaramucci. Watch the video above.


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Trader disclosure: On Jan. 31, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Adami's wife works for (MRK); Cortes owns (PM); Cortes owns (MO); Cortes owns (EXC); Cortes owns (MS); Cortes owns (GS); Cortes is long U.S. Treasuries; Cortes owns (TSN); Cortes is short (LVS); Cortes is short (BAC); Terranova Owns (VRTS); Terranova Owns (C); Terranova Owns (UPL); Terranova Owns (GM); Terranova Owns (PEP); Terranova Owns (MS); Terranova Owns (POT); Terranova Owns (LTD); Terranova Owns (SU); Terranova Owns (CVI); Terranova Owns (CVE); Terranova Owns (CPX); Terranova Owns (CNQ)

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BRIAN KELLY
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JOE TERRANOVA
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
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ZACHARY KARABELL
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DENNIS GARTMAN
Funds managed by Dennis Gartman are long Gold
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CRAIG BERGER HALFTIME PLAY OF THE DAY
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FAST 360
DAVID CAMPBELL, SCOTT NATIONS, CARTER WORTH
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PETE NAJARIAN
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MIKE KHOUW
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