The challenges facing Intel (NASDAQ: INTC) and its stock have been well documented over the past year.
With that, we’ve seen numerous rumors and a good deal of speculation suggesting the company will be broken up or bought out.
And now that speculation has reached a fever pitch with the inclusion of Donald Trump and Elon Musk.
Widely followed semiconductor analyst Dylan Patel on Friday suggested via Twitter that Intel and a bevy of industry insiders were gathered at Mar-a-Lago hashing out a potential deal to resolve the Intel issue once and for all.
Other industry notables have chimed in, as well, offering up rumors of their own.
Tech-centered newsletter SemiAccurate, said it was “read an email about a company trying to acquire Intel, whole” and that the “mystery company has the resources to pull it off.”
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Meanwhile, Qualcomm, Lattice Semiconductor, and Arm Holdings reportedly floated Intel takeover proposals in the fall, but to no avail.
At issue is the fact that Intel simply missed the boat on AI. Whereas competitors like Nvidia, Taiwan Semiconductor, and AMD raced out advanced AI chips, Intel failed to come up with anything compelling or buzzworthy.
And its Foundry business, which aims to manufacture chips for other companies, has struggled to get off the ground despite being capital intensive.
On issue there is that other chip companies are rightly hesitant to outsource production to Intel — a rival chip developer.
So, effectively, Intel is losing wars on two fronts right now. Its chip business is being outclassed by the likes of Nvidia and AMD, and its manufacturing business cannot compete with Taiwan Semiconductor.
For example, last year, Intel lost its bid to design and fabricate Sony’s PlayStation 6 chip to AMD and TSMC. That contract could have pumped $30 billion into Intel in the course of a few years.
Instead, the company continues to bleed money. Its last earnings report (released in October) showed a 6% drop in revenue and a net loss of $17 billion ($3.88 per share).
The company also spent a whopping $70 billion from 2021–2023 as it ramped up that Foundry unit.
As a result, the company now has only $24 billion in cash against $50 billion in debt. And its operating cash flow (which is used to fund capital expenditures) has plummeted from $36 billion in 2020 to $9.7 billion in the past 12 months.
As I said, chip manufacturing is capital intensive — especially when you’re competing against a juggernaut like TSMC, which has the advantage of focusing solely on production.
To that point, TSMC has tabbed $40 billion for capital expenditures on chip-building equipment and plants this year alone.
However, there’s another problem lurking here. TSMC’s dominance is something of a national security risk.
It, along with Intel, is one of the precious few companies with the means to invest in cutting-edge chip manufacturing technologies.
That’s a fact not lost on China, which clearly has designs on Taiwan — if not TSMC proper. If China were to wrest away control of the island and/or TSMC, it’d mean the bulk of advanced U.S. chip production would go through China.
To state the obvious, that wouldn’t be good. It would give China near total control over the world’s most advanced chip technology and its manufacture.
Hence the potential involvement of Trump and Musk. The two could be attempting to line up a deal that would save Intel and ensure that America has a strong domestic chip manufacturer.
That may well be the case, or it could just be another rumor.
One way or another, though, Intel seems destined to be dissolved — whether it’s bought out, broken up, or sold off in pieces. Something has to be done with it.
Fight on,
Jason Simpkins
Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more…
In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor's page.
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