Market Minute: Intel In the Crosshairs
Intel (INTC) shares jumped over 23% last week on the back of comments from Vice-President J.D. Vance and optimism around domestically based chip production. "The Trump administration believes A.I. will have countless revolutionary applications in economic innovation, job creation, national security, healthcare, free expression and beyond," Vice President JD Vance said at the A.I. Action Summit in Paris on Tuesday. "To safeguard America's advantage, the Trump administration will ensure that the most powerful A.I. systems are built in the U.S. with American designed and manufactured chips," Vance added. About 90% of the world's most advanced chips are currently made in Taiwan by Taiwan Semiconductor Manufacturing Co. (TSM). TSM is building some plants in Arizona, but those will represent a fraction of the company's worldwide capacity.
On the flipside of those bullish comments, The White House is reassessing awards under the U.S. CHIPS and Science Act, potentially delaying semiconductor funding, Reuters reported. Sources suggest the Trump administration is reviewing agreement terms to align with current policies, which could affect deals established under previous administrations and impact major semiconductor firms.
Adding to the Bullish sentiment from last week, over the weekend Broadcom and TSMC weighed possible deals that would break up Intel, according to the Wall Street Journal. Broadcom (AVGO) has been closely examining Intel's (INTC) chip-design and marketing business and has informally discussed with its advisers making a bid, but would likely only do so if it finds a partner for Intel's manufacturing business, people familiar with the matter told The Wall Street Journal. Meanwhile, TSMC (TSM) has separately studied controlling some or all of Intel's chip plants, potentially as part of an investor consortium or other structure, though the two possible bidders aren't working together and all of the talks so far are "preliminary and largely informal," the report says. The end result of any potential deals could be a breakup of Intel in two, the Journal noted.
Intel's attempted turnaround effort, led by former CEO Pat Gelsinger, is now in flux after Gelsinger's surprise retirement in late 2024. As Intel searches for a new CEO and a new strategy, the company is fighting on two fronts. Intel’s stock is down over 40% from year ago levels despite the recent rally, which is not surprising considering the investments in its Foundry business and share losses in its core CPU business to AMD. The company is in the crosshairs of competitors and the market may be seizing on the potential for a split up or a realignment from new leadership in 2025.
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Charles Schwab and all third parties mentioned are separate and unaffiliated, and are not responsible for one another's policies, services or opinions.
