Intel Stock Gets a Little Help From Its Friends

Last week we talked about the trials and tribulations of Intel (NASDAQ: INTC) stock. At the time, it’d slumped 60% jeopardizing its place in the Dow Jones Industrial Average. 

Indeed, things were looking rather bleak, but in a testament to just how quickly circumstances can change in the investing world, a few angels intervened on Intel’s behalf. 

First, Intel revealed a new multi-year, multi-billion-dollar collaboration with Amazon that will see the company manufacture AI chips for AWS. This is a huge vote of confidence for Intel, which has struggled to keep pace with Nvidia.

AWS already designs several data center chips, with Intel producing at least one version. And going forward it expects to manufacture more AWS chips through its 18AP and 14A manufacturing processes.

“This expansion of our longtime relationship with AWS reflects the strength of our process technology and delivers differentiated solutions for customer workloads,” said Intel CEO Pat Gelsinger. “Intel’s chip design and manufacturing capabilities, combined with the comprehensive and broadly adopted cloud, AI, and machine learning services of AWS, will unleash innovation across our shared ecosystem and support the growth of both businesses, as well as a sustainable domestic AI supply chain.”

That news alone was enough to cause a nice pop in Intel stock. But things got even more interesting as the week came to a close. That is, late Friday, news broke that Qualcomm has floated a proposal to take over Intel in a friendly buyout. 

The deal would be massive. Intel has a market cap of $95 billion — even after losing half its value this year. And Qualcomm is roughly double that. There’s no doubt regulators would take a long, hard look at any potential tie-up.

Still, it’d make a lot of sense for Qualcomm — a major mobile chip supplier that’s branching back out into PCs. Qualcomm also relies on TSMC and Samsung to manufacture its chips. But it could bring that production in house through Intel’s foundry business.

Qualcomm is in an advantageous position because it’s far more profitable than Intel, as well. Its second-quarter net income totaled $2.13 billion, or $1.88 per share. 

By comparison, Intel reported a paltry $0.02 per share in the second quarter, and the company forecast a $0.03 loss for the third. On a GAAP basis, Intel took a net loss of $1.61 billion, or $0.38 per share.

However, Qualcomm isn’t the only company looking to stake a claim in Intel. Apollo Global Management has also reportedly offered to make a multi-billion-dollar investment (as much as $5 billion) in the beleaguered chipmaker.

Together, this news has helped Intel stock rebound by 19% in the past two weeks. Of course, that hardly means things have turned around. 

As I mentioned, the company projects a money-losing third quarter after seeing its revenue slip by 1% in the second quarter. It’s losing out on valuable contracts like the one for Sony’s PlayStation 6 chip. 

It’s no wonder the sharks are circling. We’ll just have to see whether or not one actually takes a bite.

Fight on,