Intel Stock Plunges 6% Amid Deal Doubts
Intel (INTC) shares experienced a significant decline of 6% on Wednesday, following a remarkable upswing that had resulted in the highest five-day gain in the company's history as a publicly traded entity. This downturn occurred as analysts expressed skepticism towards recent reports indicating potential acquisitions by TSMC (TSM) and Broadcom (AVGO).
Deal Speculation Fueling Volatility
On Tuesday, Intel's stock soared by 16% following a Wall Street Journal report suggesting that TSMC, a prominent Taiwanese chip manufacturer, was considering acquiring some or potentially all of Intel's semiconductor manufacturing facilities. Additionally, the report hinted at Broadcom's interest in submitting a bid for Intel's product business, which specializes in semiconductor design for computers and servers.
Analyst Concerns Dampen Optimism
Despite the initial excitement surrounding these reports, Wall Street analysts have raised concerns about the potential breakup of Intel. Citi analyst Christopher Danley highlighted the distinct manufacturing processes employed by TSMC and Intel, emphasizing the challenges associated with TSMC assuming control of Intel's manufacturing facilities.
Regulatory Scrutiny and Political Considerations
A TSMC-Intel deal could also face significant regulatory scrutiny both domestically and internationally. Global regulators, including Chinese authorities, would need to approve such a transaction and may raise antitrust concerns. Additionally, analysts expressed apprehension that the Trump administration might be hesitant to allow a foreign entity to acquire control of a major American corporation.
Intel's Current Challenges
Historically, Intel has both designed and manufactured its own semiconductors. However, in 2022, the company introduced a foundry that opened its manufacturing facilities to external customers. Despite this initiative, the foundry has failed to attract external clients, while Intel's product business has faced declining market share. These challenges have positioned Intel as a potential acquisition target.
Analysts Cautious About Acquisition Prospects
Regarding Broadcom's potential bid for Intel's product business, Danley emphasized the need for Broadcom to acquire the entire company, rather than a specific division, for such a deal to be successful. Alternatively, Broadcom could potentially divest Intel's merchant foundry while retaining its internal manufacturing division.
However, analysts remain skeptical that Intel would be receptive to such transactions. Intel has consistently emphasized the competitiveness of its upcoming manufacturing process, targeted for production by the end of 2025. Furthermore, they question the rationale for TSMC to enter into a joint venture with a direct competitor.