Intel Stock Surges on Rumors of Broadcom and TSMC Deals

Intel (INTC) witnessed a 16% surge in its stock price on Tuesday, its largest single-day gain since March 2020. This surge was fueled by reports that its competitors, Broadcom (AVGO) and TSMC (TSM), are exploring potential deals involving Intel's split into separate entities.

According to the Wall Street Journal, Broadcom is considering a bid for Intel's product business, which specializes in designing semiconductors for computers and servers. TSMC is reportedly interested in acquiring Intel's manufacturing facilities, either partly or entirely, as part of a potential consortium of investors.

While no formal offers have been submitted, these discussions are said to be preliminary and informal. Broadcom shares declined slightly on Tuesday, while TSMC's US-listed shares saw a modest loss.

The speculation regarding these potential deals has been a catalyst for Intel's recent rally. Last Friday, the stock recorded its largest weekly gain since 2000 after the US government expressed support for domestic chipmaking and reports emerged of talks with TSMC to assist Intel's turnaround efforts.

Intel's manufacturing business, while primarily producing chips for its internal use, has also ventured into a foundry model, accepting external customers since 2022. However, the business has faced challenges in attracting external clients and has been incurring losses. This lackluster performance has contributed to Intel's disappointing earnings in 2024, leading to a 60% decline in its stock price.

Analysts have supported the idea of Intel dividing its operations. In a note to investors, Raymond James analyst Srini Pajjuri emphasized, "Splitting Intel Product and Foundry is key to unlocking value."

Intel's plans to establish an independent subsidiary for its foundry business further support the possibility of a future split. This move was seen as a strategic step towards potential separation.

However, some analysts are cautious about a potential Intel breakup. Bank of America's Vivek Arya noted the potential complexities and time consumption of a split, citing constraints related to Intel's US CHIPS Act funding and antitrust concerns. A deal with TSMC could also face regulatory challenges from China.