A tech company that has struggled significantly over the past year may have an unexpected saving grace.
Intel (INTC) was once ranked among the tech sector’s leaders, riding the PC wave of the late 1990s to impressive heights. However, despite some growth in 2021, the computer component producer failed to innovate at a pivotal time, falling behind old and new rivals amid the fast-growing artificial intelligence arms race.
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As INTC stock has trended downward over the past year, Wall Street sentiment has shifted in an increasingly bearish direction, with most analysts maintaining either Hold or Sell ratings.
However, Intel has recently picked up some noticeable momentum, and on Tuesday, it posted its largest five-day gain to date.
What is the reason for this tailwind? A recent development indicates that Intel could be on the verge of a major change, as two tech sector leaders consider a highly strategic maneuver.
Intel may have a second chance at growth courtesy of two competitors
Intel shares suffered significant losses over the past year, falling more than 40%, while many of its rivals have demonstrated growth. However, one of the industry’s most dominant chip makers has identified a clear opportunity to expand its own operations as Intel faces an uncertain future.
In stark contrast to Intel, Broadcom (AVGO) is coming off a year of growth and momentum. Shares are currently up more than 85% for the year as enthusiasm for its custom silicon chips, which some experts see as a better alternative than Nvidia’s (NVDA) graphic processing units (GPUs).
Related: Broadcom CEO sounds alarm on crucial shift in AI-chip market
Now, Broadcom may consider submitting a bid for Intel’s product business, which designs semiconductors and servers.
The Wall Street Journal reports that the leading chipmaker has “informally discussed with its advisers making a bid but would likely only do so if it finds a partner for Intel’s manufacturing business,” according to source speculation.
Broadcom isn’t the only tech player looking to purchase part of Intel, though. Taiwan Semiconductor Manufacturing (TSM) , a company with which Intel has routinely failed to keep pace, is reportedly interested in either obtaining a stake or taking complete control of Intel factories, an idea that the Trump administration has asked it to explore, according to the Journal.
Although nothing has been confirmed yet, interim Intel chairman Frank Yeary is reportedly meeting with multiple interested buyers.
Hendi Susanto, a portfolio manager at Gabelli Funds, spoke to TheStreet about the potential impact that either or both deals could pose, both for INTC stock and the companies considering a bid.
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“TSMC running Intel’s US factories can be a winning strategy for Intel, TSMC, and the U.S. government’s national interest,” Susanto states. “TSMC can meaningfully accelerate Intel’s execution to “fix” its manufacturing roadmap and execution, including the utilization of extreme ultraviolet (EUV) technology.”
Susanto also predicts combining Broadcom and Intel will create a “powerful ecosystem, not only for traditional data centers but also for cloud and AI infrastructure,” likely creating significant value for investors.
Risk and opportunities for investors if Intel makes a deal
While speculation for the potential Intel deals is still trending, INTC stock has reversed course today and is back pointing downward. This may indicate that investors are still taking a measured approach to the stock, as there is still no guarantee that a deal will be reached.
Investment Advisor Marcus Sturdivant Sr., founder of ABC Squared, notes that Intel’s recent history may pose complications but highlights the federal government’s clear desire to see it succeed.
Related: Intel faces a major threat to its plans
“Broadcom or TSMC are not rushing for the mess that Intel has on its balance sheet, but both see the utility of the foundry and production capacity,” he states, noting that Broadcom could benefit significantly from increasing its capacity to produce chips, something that Intel does domestically.
Sturdivant also notes that other prominent tech companies, such as Arm Holdings (ARM) and Qualcomm (QCOM) , expressed interest in acquiring Intel over the past year, although neither could reach a deal.
He speculates that it may make sense for Nvidia to bid on Intel’s factories, as it could also benefit from the company’s domestic chipmaking presence.
However, he acknowledges that “this Intel situation as a whole is fluid and could be completely changed by a post on a platform,” highlighting the uncertainty surrounding the potential deals.
While it is clear that any company that purchases these Intel assets will likely gain an advantage in the U.S. chip maker. Wall Street veteran Stephen Guilfoyle recently updated his INTC price target following news of the potential acquisitions.
“This remains measured is a medium-term trade, not an investment,” he states.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
