Intel stock surged by 13% on Tuesday, fueled by reports of potential deals with rivals Broadcom (Avgo) and TSMC (TSM) that could result in the chipmaker being split into two separate entities. The Wall Street Journal revealed that Broadcom is considering a bid for Intel’s product business, which focuses on designing semiconductors for computers and servers. Meanwhile, TSMC has shown interest in acquiring some or all of Intel’s factories, possibly as part of an investor consortium. Although no formal deals have been proposed yet, these discussions have propelled Intel’s stock to new heights.
Key points to consider:
- Intel’s recent momentum: Intel’s stock has experienced a significant upward trend in the past week, marking its largest weekly gain since 2000. This surge comes at a time when the US government is signaling support for domestic chip manufacturing, with reports indicating collaboration between the US and TSMC to bolster Intel’s turnaround efforts.
- Intel’s manufacturing business challenges: Despite efforts to enhance its manufacturing business by launching a foundry to cater to external customers, Intel has faced challenges in attracting outside clients and grappling with financial losses. Last year, Intel’s stock plummeted by approximately 60%, leading to the departure of then-CEO Pat Gelsinger.
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Analyst recommendations: In light of Intel’s struggles, Wall Street analysts have advocated for the company to split its business into two distinct entities. Raymond James analyst Srini Pajjuri emphasized the potential value unlock of separating Intel Product and Foundry divisions, suggesting that this strategic move could benefit the company in the long run.
Intel’s strategic moves towards split:
- Last year, Intel announced its intention to establish an independent subsidiary for its foundry business, which would operate separately from its core product division. This move was seen as a step towards a potential split, although funding limitations from the US CHIPS Act could impact Intel’s ability to fully divest its manufacturing arm.
In conclusion, Intel’s potential split into two entities amid interest from Broadcom and TSMC reflects the company’s ongoing efforts to address its manufacturing business challenges and unlock value for its stakeholders. As the discussions progress, Intel faces a pivotal moment in determining its strategic direction and navigating the evolving semiconductor landscape.
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