Intel (INTC) stock fell 6% Wednesday, ending a massive upswing in which shares notched their biggest five-day gain in its history as a publicly traded company. The decline came as analysts expressed skepticism over recent reports of potential deals with TSMC (TSM) and Broadcom (AVGO) to break up the storied US chipmaker.
As of 2:09:16 PM EST. Market Open.
Shares of Intel had surged 16% Tuesday following a Wall Street Journal report over the weekend that its rival, Taiwan’s contract chip manufacturer TSMC, has looked at controlling some or all of Intel’s semiconductor factories, potentially as part of an investor consortium. The Journal, citing people familiar with the discussions, also reported that Broadcom (AVGO) is considering making a bid for Intel’s product business, which designs semiconductors for computers and servers.
A news report the prior week had indicated that the US was floating proposals to TSMC to support Intel’s turnaround. One of the proposals would reportedly establish a joint venture between TSMC and Intel, in which TSMC would send engineers to Intel to ensure its manufacturing business is viable.
Investors cheered the reports, with Intel gaining 38.5% over the five days ended Tuesday.
But Wall Street analysts have voiced concerns over a potential breakup of Intel.
Citi analyst Christopher Danley noted that TSMC and Intel use separate manufacturing processes. Because Intel’s chips are specifically designed using its own manufacturing processes, it wouldn’t make sense for TSMC to take control of its manufacturing facilities, he said.
“Just because two companies are making the same type of chip, they have completely separate software tools, processes, methodologies, all kinds of stuff,” he told Yahoo Finance in an interview Wednesday. “These guys that have worked at Intel for 10, 20, 30 years would have to learn completely new processes. It would just be a fiasco.”
A TSMC-Intel deal could also face scrutiny from regulators at home and abroad. That’s because global regulators, including Chinese authorities would need to approve the deal, and they may have antitrust concerns, Wall Street analysts said.
And the Trump administration “could be wary of a foreign entity completely taking over an iconic US-firm,” Bank of America analyst Vivek Arya wrote in a note to investors Tuesday.
Intel has long designed and manufactured semiconductors for itself, but the company opened up its manufacturing business to external customers — launching what’s called a foundry — in 2022. The foundry has failed to take on external customers, analysts say, and its product business has lost market share to rivals. Those struggles have made Intel an acquisition target in recent months.