Intel Stock Falls as Analysts Skeptical of Potential Deals

Intel (INTC) shares plummeted by 6% on Wednesday, reversing a significant rally that had seen them achieve their largest five-day gain in the company's public trading history. The decline follows analysts expressing doubt over recent reports of potential transactions with TSMC (TSM) and Broadcom (AVGO) to potentially acquire parts of the American chipmaker.

TSMC's Potential Acquisition

Media reports over the weekend suggested that TSMC, a Taiwanese contract chip manufacturer, was exploring the possibility of taking control of some or all of Intel's semiconductor plants. Sources familiar with the discussions indicated that the deal could involve an investor consortium.

Broadcom's Interest in Intel's Product Business

Another news report indicated that Broadcom was considering acquiring Intel's product business, responsible for designing semiconductors for computers and servers. This would involve Intel splitting into separate entities.

Analyst Concerns

Analysts have raised concerns about the potential breakup of Intel. Citi analyst Christopher Danely pointed out that TSMC and Intel utilize different manufacturing processes. Since Intel's chips are designed specifically for its processes, it would not make sense for TSMC to acquire Intel's manufacturing facilities, he argued.

Additionally, a TSMC-Intel deal could face regulatory scrutiny from authorities in the US and abroad due to antitrust concerns and potential national security implications.

Intel's Foundry Struggles

Intel has traditionally designed and manufactured semiconductors internally. However, the company launched a foundry operation in 2022 to serve external customers. Analysts have suggested that this move has not been successful in attracting significant market share.

Potential Broadcom Acquisition

Danely believes that Broadcom would need to acquire Intel in its entirety for a potential acquisition to be successful, given the synergies between the manufacturing and design sides of the business.

Intel's Stance

Analysts suggest that Intel is unlikely to favor splitting up the company, as it maintains that its manufacturing process will be competitive with TSMC's by the end of 2025. They also believe it would not be strategically advantageous for TSMC to enter into a joint venture with Intel.