Intel Stocks: A Murky Future for Investors?

Intel (INTC) shares have experienced a surge recently, fueled by promises of domestic chip manufacturing support and reports of potential acquisitions of company divisions. However, investors should proceed with caution as the likelihood of transformative deals in the near term is low, and the fundamental challenges facing Intel remain.

 

• Recent Stock Rally: Intel's stock rose nearly 40% over five trading sessions due to Vice President JD Vance's vow to increase U.S. chip manufacturing and reports of Taiwan Semiconductor Manufacturing (TSMC) considering a stake in Intel's chip factories, while Broadcom explored buying Intel's product business. By Feb 26, shares of Intel were trading at 24.87, up 5.4.
• Contradictory Reports: News reports regarding potential deals have been conflicting, with some suggesting the Trump administration proposed TSMC taking a controlling stake in Intel's factories, while others cited a White House official stating Trump would likely oppose such a deal.
• Uncertainty Surrounding Deals: The potential Intel mergers and acquisitions are in "very early stages" with "no formalized structure". Intel and TSMC have declined to comment on these reports.
• Regulatory Hurdles: Any major transaction, such as the purchase of Intel's product group, would require approval from global regulators. China previously blocked Intel's acquisition of Tower Semiconductor, indicating reluctance towards deals benefiting the U.S. chip-making industry.
• Challenges in Separating Operations: Separating Intel's chip manufacturing operations poses financial challenges. In 2024, Intel foundry generated $17.5 billion in revenue but incurred a $13.4 billion loss. It is unclear how China would then be amenable to Broadcom purchasing Intel’s product business.
• CEO Uncertainty: Intel lacks a permanent CEO following Pat Gelsinger's retirement. Discussions about splitting up Intel may hinder the recruitment of top talent.

 

Expert Opinion:

Former Intel executive and chip designer Jim Keller criticized the potential sale of Intel's parts as a "fire sale," emphasizing the importance of having a great goal and a team dedicated to achieving it. He stated that Intel needs to focus on building the fastest CPUs with the best process.

 

Investment Recommendation:

Investors may consider taking profits given the uncertainty surrounding Intel's future. Waiting for a deal that may not materialize could lead to disappointment. It would be better to focus on recruiting a competent leader with technical expertise to figure out a turnaround strategy focused on making a competitive best-in-class AI chip offering and stabilize the business.