MW An Intel deal now seems less likely. These clues may hold the key to its future.

By Therese Poletti

Investors appear to be now be discounting recent M&A speculation that Intel will split in two

Intel Corp. investors appear to now be discounting recent speculation that the chip giant could be split in two as part of any sort of big merger deal.

After Broadcom Inc. $(AVGO)$ Chief Executive Hock Tan told analysts late Thursday on the company's earnings call that he was "too busy" to pursue any mergers and acquisitions, that put a further dent in hopes that Intel would find a buyer for its design business.

Intel's stock $(INTC)$ reflects how investors already had soured on the company's merger prospects even before Tan's comments. The stock fell just fractionally in Friday's action, but it's down about 25% from this year's peak close of $27.39 hit on Feb. 18.

Last month, the Wall Street Journal reported on preliminary discussions within Broadcom, which was reportedly looking at making a bid for Intel's chip-design and product business. At the same time, Taiwan Semiconductor Manufacturing Co. Ltd. $(TSM)$ (TW:2330) was said to be looking at taking control of some of Intel's foundry and manufacturing operations.

Read: Why Broadcom's earnings are clicking with investors after Nvidia's fell flat

Another issue Intel investors are assessing is that President Donald Trump has come out strongly against the U.S. Chips Act, calling it "a horrible, horrible thing" during his congressional address Tuesday. He also touted a massive recent deal by TSMC to invest another $100 billion in its U.S. manufacturing plants.

"We don't have to give them money," Trump said, adding that TSMC, as well as other chip makers, was motivated to build more plants in the U.S. by his latest rounds of trade tariffs.

"They will come because they won't have to pay tariffs if they build in America," he told Congress. "You should get rid of the Chips Act."

Read: Trump hates the Biden-era Chips Act. What's next for semiconductor stocks.

For Intel, these recent developments seem to be a mixed bag, and its stock is reflecting that. After Vice President J.D. Vance touted American chip making during a European tour in February, Intel shares soared as investors surmised that Trump might broker some merger action for Intel, which was once the crown jewel of the U.S. semiconductor industry. At least, he seemed to be trying to entice more U.S. chip makers to use Intel's commercial manufacturing business.

Read: Is Intel now a Trump stock? Its shares surge after upbeat comments by J.D. Vance.

Yet after this week's news, Robert Maire, president of Semiconductor Advisors, told MarketWatch that "Intel was left at the side of the road."

However, not many people in Silicon Valley believed that a partnership between Intel and longtime rival TSMC would have been a good thing. "Intel always had a different process than TMSC," said David Yoffie, a professor at Harvard Business School and a former Intel board member, who co-authored an article for Fortune on why that sort of takeover was such a bad idea.

Intel's manufacturing business has been slow to realize its revenue potential because it needs to get more big chip makers as customers. Bernstein Research analyst Stacy Rasgon recently met with Kevin O'Buckley, the general manager of Intel's foundry business, and said the Intel executive acknowledged this as a core business problem.

"Their competitor has a customer-service mindset that Intel has never developed, but needs to in order to succeed in foundry," Rasgon said in a note to clients this week.

Another big drawback for Intel was its loss of process-technology leadership in recent years. Intel has made some big strides with its next-generation process, called 18a, but it is still seen as slightly behind rival TSMC when it comes to manufacturing nodes.

Rumors swirled recently that Intel's next-generation Panther Lake chip - the first product scheduled for volume on 18a - is behind schedule. Rasgon mentioned O'Buckley as saying "the current noise around poor yields etc. was 'FUD'" - referring to "fear, uncertainty and doubt."

John Pitzer, Intel's vice president of investor relations, spoke at Morgan Stanley's technology conference this week, and he addressed a question regarding reports that Panther Lake had slipped, saying it will launch in the second half of this year. "We feel really good about the progress that we are making," Pitzer said. "In fact, if you look at where our yields are on Panther Lake today, they're actually slightly ahead."

But a further split between the two businesses seems to be necessary in order to win more customer trust in manufacturing. The foundry business is not expected to break even until at least 2027, though Rasgon noted that the company believes it has sufficient capital to reach its milestones. In 2022, under former CEO Pat Gelsinger, Intel signed a $30 billion deal with Brookfield Asset Management Inc. (BN) $(BAM)$ to finance new fabrication facilities, also known as fabs.

Meanwhile, Intel has remained quiet on the search for a new CEO to replace Gelsinger, who retired after a beleaguered, nearly four-year tenure late last year.

-Therese Poletti

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March 08, 2025 07:00 ET (12:00 GMT)

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