Chipmaker Intel’s Strategic Partnerships: Will It Revive the Stock’s Performance?

Intel’s current picture is far from gaining investor attention. How far will it take to regain its value in the market? 

There are umpteen such questions as how Intel can attain its original market value. 

With the S&P up roughly 18% and shares trading down to about 57% in 2024, it is pretty clear that things are shaky for Intel. This semiconductor giant has lost over half its value this year, leaving Wall Street uncertain about its future following the most recent and bizarre disappointment. 

Following this, the company announced the separation of its manufacturing division from the main processes of manufacturing and selling computing processors.  

Intel’s road to revival does not seem promising, but certain cards have yet to be played. Conversations around acquisitions and mergers are taking place, and Intel’s entry into the AI club is also under the radar.   

Intel: The Current Landscape

The company stock rose to 11% in the week starting 16th September, its best since November.  

In the coming years, Intel is focused on tackling the gigantic hurdles of spending more than $100 billion through 2029 to build chip factories in four states and gain a foothold in AI, the future of technology.   

In an effort to persuade American chipmakers to shift their production from Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung to local sources, Intel plans to invest around $25 billion this year and $21.5 billion the following year in its foundries.   

If Intel’s main business operated at peak performance, Wall Street would be more receptive to that scenario. Yet even though Intel continues to produce the bulk of the processors found in PCs, laptops, and servers, Advanced Micro Devices is gaining market share and reporting revenue drops that put its financial flow at risk.

Intel’s shares fell 26% on August 4th, closing at $21.48, the lowest price since 2013.

With its market value dropping to $86 billion, Intel is no longer among the top 10 chipmakers globally. Intel’s yearly sales were three times greater than Nvidia’s as recently as 2021.

According to market data, Nvidia’s 2024 returns have been 144%. Intel is in a riskier position than Nvidia, as its stock has dropped by 57% this year. To understand Nvidia’s impressive growth and what the future holds, you can explore our in-depth analysis of Nvidia’s stock and predictions.

Will The New Foundry Plans Help Intel Stock? 

In the memo released on September 16th, CEO Pat Gelsinger said Intel will move forward without spinning off the foundry. He said the ‘two halves’ are better together. However, a separate unit with its board of directors and the potential to raise outside capital might be set up for the foundry. 

Intel stated that increasing capital efficiency will be crucial for its foundry operations. It stated that it is now time to shift from a phase of fast investment to one that is more normalized, having switched to extreme ultraviolet lithography (EUV) manufacturing technology. 

The business also disclosed an expanded agreement with Amazon, whereby the two will jointly fund the development of unique semiconductor designs. 

Intel’s foundry will also manufacture Xeon 6 chips utilizing Intel 3 technology and artificial intelligence (AI) fabric chips for Amazon Web Services utilizing the company’s most recent 18A technology. 

As for now, Intel’s most significant foundry customer is itself. With $4.3 billion in revenue for the most recent quarter, which concluded in June, it experienced an operating loss of $2.8 billion. 

But the Challenges Continue  

With sheer competition from other AI solutions providers like X AI, to stay competitive, Intel has been laying off thousands of employees and, early this year, selling its 1.18 million shares in British chipmaker Arm Holdings. Frustrated by the company’s large workforce and differences over revival strategies, industry veteran Lip-Bu Tan quit.  

Tan’s resignation due to Intel’s strategy highlights the unpredictability of the company’s turnaround efforts. Building its foundry business, which assists other businesses like TSMC in manufacturing chips, is a key component of Intel’s comeback strategy. 

However, the business has not revealed a significant client and has stated that it won’t be profitable until 2027. 

Regarding AI stocks, from tech AI and voice AI stocks such as Sound Hound AI, an investor must also thoroughly analyze Intel’s performance and long-term predictions.  

How will the Qualcomm Takeover help?

California-based Qualcomm has approached Intel for a friendly takeover. The strategy applies to the chipmaker, while Qualcomm hasn’t ruled out purchasing all of Intel or just some of its shares.  

Over the same time frame, Qualcomm’s stock has increased by more than 50%, giving it a market capitalization of over $188 billion. Any agreement between Qualcomm and all of Intel at these prices would be among the biggest ever.

The Apollo Approach

Apollo Global Management has proposed a multi-billion dollar investment ($5 billion, to be precise)  in Intel at a time of declining stock value and constantly delayed product timelines. If this deal materializes, it could be one of history’s larger mergers and acquisitions.   

This investment would align with Intel’s long-term strategy of raising additional funding and strengthening its market position. With a history of investing in distressed companies, Apollo even collaborated with Intel for a joint venture. 

For $11 billion, Intel sold Apollo a share of a joint venture that runs a factory in Ireland. This action aimed to obtain outside money for Intel’s massive manufacturing expansion.

Will the Intel Stock Bounce Back?

The foundry’s division into a new company may pave the way for Intel to spin off the company completely. This would eliminate a problem that Intel was spending money on, even though it wouldn’t improve the company’s circumstances.

But the foundry isn’t the only problem the business is currently facing. The company’s products division suffered revenue declines in two of its three product categories last quarter: network and edge revenue decreased by 1% to $1.3 billion, and data center and AI revenue fell by 3% to $3 billion.

However, compared to the $1.20 analyst estimate for the entire company, which includes losses from the foundry business, its core product business might achieve about $2.10 in earnings per share.  

Its primary business would then be closer to a ten-fold forward P/E. That isn’t costly, yet the Foundry, Altera, and MobileEye companies are still valuable. 

There is a chance the stock will rise as it prepares to spin off its foundry and then the Altera company, which is scheduled for 2026.  

To improve its overall status, the corporation still has a lot of work ahead of it.

Bottom Line

The future seems quite uncertain for Intel. 

While challenges in chip manufacturing persist, collaborations with companies like TSMC, MediaTek, and Mobileye show Intel’s adaptability and commitment to reclaiming its leadership in the semiconductor space. 

However, executing these strategies will determine whether Intel can regain investor confidence and sustain long-term stock performance.

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