Intel Stock Rallies on Acquisition Rumours: Key Takeaways

Intel stock (NYSE: INTC) rallied over 9% yesterday and had its best day since August on reports that the company is an acquisition target. The stock is up in post markets also but the once-iconic chipmaker is still down over 53% from its 52-week highs and trades at a fraction of its all-time highs.

SemiAccurate, a tech-focused newsletter said around two months back it “read an email about a company trying to acquire Intel, whole. We have absolute faith in the accuracy of this email but it took months to confirm it.”

The report said that it now has confirmation from another “highly placed source.” The publication adds, “This took SemiAccurate from about 60% confidence in the plan being real to more than 90%. Subsequent conversations have moved it to the point of near certainty.”

While the report does not name the potential suitor, it adds, “This mystery company has the resources to pull it off, especially at Intel’s current valuation.”

Qualcomm Was Reported to Be Interested in Buying Intel

Last year, there were reports that Qualcomm was looking to acquire Intel. While both Intel and Qualcomm are in the chip industry and compete in many markets, especially the PC industry, their business models differ. Qualcomm, like Nvidia, is a chip-designing company and relies on foundries like Taiwan Semiconductor Manufacturing Company to produce its chips.

Intel on the other hand has both chip designing and foundry business. The company’s foundry business has been posting massive losses and the segment’s operating losses widened to $7 billion in 2023 – compared to $5.2 billion in 2022.

Intel has been looking to build its foundry business and make chips for other companies. The company is among the biggest beneficiaries of the Biden administration’s CHIPS and Science Act and last year received another $3 billion in funding as the US seeks to onshore chip production.

Meanwhile, in its report, SemiAccurate said that the company interested in buying Intel “is not one of those companies thrown out by clickbait sites after Pat Gelsinger was fired; we have not seen any rumor of this company’s interest in public statements.”

Gelsinger Retired in December

Intel’s CEO Pat Gelsinger, who led the company’s turnaround efforts, abruptly retired in December. Notably, Gelsinger, who was a former Intel executive, took over as the CEO in early 2021 and embarked on a plan to transform the struggling chipmaker. Under his leadership, Intel laid focus on three key areas.

Firstly, it worked on innovation in the chip designing business to effectively compete with the likes of AMD and Nvidia. The second leg of the turnaround strategy was pivoting the company to the foundry business where Intel started building chips for other companies. Finally, Intel started unlocking value in its subsidiaries and successfully listed Mobileye.

However, despite Gelsinger’s turnaround efforts Intel stock continued to fall and crashed to multi-year lows last year after dismal Q3 earnings. The company also suspended its dividend and announced that it would cut its workforce by 15%.

Intel’s foundry business has been burning a lot of cash as it is expanding chip-making facilities in the US and Europe. Intel has been losing market share in the core CPU market while its artificial intelligence (AI) efforts have lagged peers, especially Nvidia which has become a $3 trillion behemoth amid the AI pivot.

Intel Could Pursue Strategic Alternatives

Meanwhile, after Gelsinger’s departure, Intel is expected to pursue some strategic alternatives that he was opposed to. “Gelsinger was firmly against breaking up the company, but the prolonged and expensive turnaround has tested shareholder patience, potentially forcing Intel to reconsider,” said Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada.

Here are the three alternatives the analysts believe Intel can pursue

Splitting the foundry and products division

Earlier this year, Intel turned its foundry business into a subsidiary that could also pursue funding from third parties. However, given the massive losses the segment is currently incurring there might not be many suitors for the business on a standalone basis. Also, Intel has to maintain at least a 35% stake in its foundry business as part of its funding agreement under the Chips Act.

The product business has been doing relatively better but even it has been losing share to the likes of AMD. As Bank of America aptly said in its note, “Both businesses are undergoing their own strategic, structural, financial, and competitive issues, with no near term solution in sight.”

Finding a Buyer

The second alternative that Intel could pursue per Bloomberg is the sale of the business. However, a possible acquisition of Intel by a rival chipmaker would face regulatory heat.

Previously Chinese regulators blocked Intel’s bid to acquire Tower Semiconductor and Qualcomm’s proposed acquisition of NXP Semiconductor. Other regulators too have been wary of big mergers in the chip space, and in 2018, then-President Donald Trump blocked Broadcom from acquiring Qualcomm over national security concerns. More recently, Nvidia and Arm called off their merger amid regulatory heat in Asia, Europe, and the US. Arm, which is backed by Japan’s SoftBank eventually went for an IPO.

Selling Altera unit

The third alternative that Intel could pursue could be selling the Altera unit that it acquired for a mammoth $17 billion in 2025. Intel has anyways been open to unlocking value and has reportedly been in talks to sell a stake in Altera previously also. The talks might gain traction under the new CEO and the company might even consider selling the unit entirely.

All said, reports of Intel being acquired have popped up quite often over the last six months, and among others, Arm Holdings was also said to have considered buying the company’s Products segment. So far, none of these have materialized and it remains to be seen whether Intel, which was once the dominant chipmaker globally, is acquired – either in whole or in parts.