Santa Clara, California – Intel’s stock saw a surge on Tuesday following the announcement of support from the U.S. government and a partnership with Amazon Web Services. The chipmaker also revealed plans to strengthen its operations by establishing an independent subsidiary for its foundry business.
While the actions were positively received on Wall Street, analysts still caution against investing in Intel stock. Out of 45 analysts covering the stock, only three recommend buying, 36 advise holding, and six suggest selling according to data from the Wall Street Journal.
In a message to employees on Monday, Intel Chief Executive Pat Gelsinger unveiled the next phase of the company’s transformation. The decision to create an independent subsidiary for Intel Foundry aims to provide clarity for customers and suppliers while enabling the business to explore alternative sources of funding.
Additionally, Intel has postponed the construction of manufacturing plants in Poland and Germany by approximately two years. The company also plans to divest about two-thirds of its real estate assets by the end of the year, following cost reduction measures announced on August 1. Furthermore, Intel intends to sell a stake in its Altera unit in preparation for a potential initial public offering.
After markets closed on Monday, Intel forged a strategic alliance with Amazon Web Services to jointly invest in custom chip designs under a multiyear, multibillion-dollar agreement. The collaboration will include the production of an AI fabric chip for AWS on Intel 18A, the company’s most advanced process node.
Intel also disclosed an award of up to $3 billion in direct funding from the U.S. government under the Chips and Science Act for the Secure Enclave program, where Intel will deliver chips for U.S. Defense Department initiatives. The deal with AWS and the U.S. government funding are expected to advance domestic chip manufacturing.
Intel’s stock climbed 2.7% to $21.47 on Tuesday, following a 6.4% increase to $20.91 on Monday. Analysts view Intel’s recent developments favorably, with Mizuho Securities’ Jordan Klein noting a shift in sentiment from “life support to critical condition.” However, Deutsche Bank’s Ross Seymore emphasizes that transformational efforts will impact Intel’s financials in the coming year.
Despite positive momentum, BofA Securities’ Vivek Arya maintains an underperform rating on Intel stock. He believes the operational update leaves lingering uncertainties. As Intel charts a new course, market watchers closely monitor the company’s progress and financial performance in the evolving semiconductor landscape.