Intel Surges as Rivals Explore Deals Amidst Chipmaker Restructuring

Key Points:

* Intel (INTC) stock surged 16% following reports of potential deal discussions with Broadcom (AVGO) and TSMC (TSM).
* Broadcom reportedly eyes Intel's product business, while TSMC considers investing in some or all of Intel's factories.
* Intel's manufacturing business has struggled to gain external customers and has faced cash losses.
* Wall Street analysts support a potential split of Intel's business into two entities.
* Intel announced plans last year to create an independent subsidiary for its foundry business, potentially setting the stage for a separation.

Detailed Report:

Intel's stock witnessed a remarkable surge Tuesday, jumping 16% after a report by The Wall Street Journal revealed that rivals Broadcom and TSMC are exploring potential transactions involving the chipmaker. Broadcom is reportedly contemplating a bid for Intel's product business, while TSMC is considering investing in Intel's factories, possibly as part of a consortium.

The talks remain preliminary and informal, and no formal offers have been submitted. Shares of Broadcom declined by nearly 2% Tuesday, while US-listed shares of TSMC dropped by less than 1%.

Intel's significant gain was its largest single-day jump since March 2020. The rise follows a 38.5% gain in the company's stock price over the past five trading days, marking a record gain for Intel as a public company.

Intel's recent surge is attributed to several factors, including US support for domestic chipmaking and reports of the US government's alleged talks with TSMC to bolster Intel's efforts to revitalize its operations.

Intel's manufacturing business initially focused on producing chips for its own products but expanded into providing foundry services for external customers in 2022 under the leadership of former CEO Pat Gelsinger. However, the business has struggled to attract clients and has experienced continued cash losses.

Intel's overall performance throughout 2024 underwhelmed investors, leading to a 60% stock price decline last year. The company's board subsequently removed Gelsinger as CEO in December.

Given its challenges, Intel has become a potential acquisition target, with reports of interest from various companies, including Qualcomm, Arm, and Apollo. Wall Street analysts generally support the idea of Intel splitting its business into two entities.

Intel announced plans last year to create an independent subsidiary for its foundry business, separating its finances and operations from its products division. This move was seen as a potential precursor to a future split.

However, some analysts express caution about the potential complexities and time required for a breakup. Additionally, there are concerns about regulatory hurdles and antitrust issues, particularly in relation to Intel's US CHIPS Act funding and potential dealings with TSMC.