Intel Stocks Surge as $2 Billion SoftBank Investment and Potential US Government Stake Fuels Optimism

Intel's (INTC) shares experienced a leap on Tuesday as the Trump administration hinted at potentially providing much-needed relief to Intel's troubled foundry sector. On Monday, it was announced that SoftBank of Japan had agreed to invest $2 billion in Intel, thereby becoming Intel’s fifth-largest shareholder, as per FactSet data. The announcement further stirred anticipation after the US Secretary of Commerce, Howard Lutnick, suggested on CNBC that Intel could offer equity to the U.S. in exchange for the CHIPS Act grant pledged by the Biden administration. Reports emerged last week via The Wall Street Journal that the US government was considering acquiring a 10% stake in Intel. This initiative forms part of a larger plan to bolster domestic chip manufacturing and provide the US with an advantage in the escalating global race for dominance in artificial intelligence. As per Bernstein analysts, Intel, despite advancing issues, remains America's only viable entity in the frontline semiconductor chips and process landscape. This announcement apparently had a significant impact, as Intel stocks closed 7% higher on Tuesday, making them the S&P 500's largest gains for the day. After plummeting by almost 60% in 2024, Intel's stocks have seen a 26% rise since the beginning of the year. Founder and chief analyst at Moor Insights & Strategy, Patrick Moorhead, believes that SoftBank’s news could lay the foundation for probable investment by the federal government and other deals. He anticipates additional investors, including companies such as Nvidia, Broadcom, and AMD, or hyperscalers like Microsoft, Amazon, and Alphabet. These firms are all in the process of developing their own chips. However, the move could also signify SoftBank’s chip ambitions. Possibly, the most probable reason for the investment would be SoftBank's aim to construct its rumored Arm CPU tiles, AI XPUs, and Ampere chips in relation to Stargate. Teaming with Intel for the production of these products might play into Masayoshi Son’s commitment to pump $100 billion in the U.S., Moorhead pointed out. While their “neutral” rating accompaning a $25 price target on Intel’s stock holds, UBS analysts infer that there is the potential for Intel shares to reach $40- contingent on a series of events. To attain this price, Intel would likely have to secure a few significant foundry clients, potentially including Nvidia, Broadcom, and Apple. The government could play a critical role in this regard, whether through coercion, heavy persuasion, tariff policy, or other regulatory means. However, Bernstein argues that the US government's involvement and efforts to direct chip designers toward Intel foundries might not suffice to establish a self-reliant American AI chip industry. Intel would also have to regain the technological advantage that once established it as the world's most valuable chipmaker. As Bernstein further warns, without a firm technological roadmap, the proposed U.S. investment in Intel equates to literally burning billions of dollars, as there is little that the US government can directly do to assist in this respect.