Intel Corp. shares are poised for their largest one-week increase on record, fueled by unverified reports of a potential partnership with a major competitor, sparking optimism for a recovery after a prolonged downturn. The chipmaker’s stock has surged by as much as 32% this week, marking the most significant rise in its over 40-year history, according to Bloomberg data dating back to 1982. However, the stock dipped 4.2% on Friday morning, bringing the weekly gain down to 21%, the highest since March 2020. Despite this recent uptick, shares remain at their highest level since December, doing little to counter last year’s 60% decline.
Much of the recent increase is attributed to speculation that the U.S. government may become involved in a plan that includes both Intel and Taiwan Semiconductor Manufacturing Co. (TSMC), the largest outsourced chip manufacturer serving companies like Apple Inc., Nvidia Corp., and Advanced Micro Devices Inc. TSMC’s advancements in manufacturing have outpaced Intel, allowing its clients to capture market share from the American firm. Baird analyst Tristan Gerra noted that TSMC could send engineers to Intel’s 3nm/2nm fabrication facility, leveraging its expertise to ensure the viability of Intel’s manufacturing projects. He suggested that this facility could potentially be spun off into a new entity jointly owned by TSMC and Intel, managed by TSMC, and funded by the U.S. Chips Act.
Daniel Newman, CEO of The Futurum Group, expressed that the notion of a partnership is very promising, although he emphasized that it remains unconfirmed. He acknowledged that while many discussions are likely taking place, he is cautious about believing every rumor. He pointed out that the stock is trading near its book value, indicating potential deep value, albeit with significant risk, as the turnaround is far from complete. Investors entering at this stage are making a calculated bet at a low valuation, hoping for a successful partnership, a transformative CEO, or that the worst is behind the company.
Despite being a long-standing leader in the semiconductor industry, Intel has faced challenges in recent years, particularly as the focus has shifted to artificial intelligence accelerator chips, an area where Intel has struggled to compete with Nvidia. The company has also lost market share to Advanced Micro Devices and TSMC. An ambitious turnaround strategy, which involves a costly spending plan aimed at restoring its manufacturing and product prominence, has yet to yield substantial results. CEO Pat Gelsinger, who led this strategy, was ousted in December, and the company’s CFO has indicated that a potential breakup of the company remains a possibility. There have also been reports suggesting that Intel could be a target for acquisition.
