Intel stock climbs further on Wednesday after revelations that Taiwan Semiconductor Manufacturing Company (TSMC) is negotiating with major chipmakers, including Nvidia and AMD, to possibly operate Intel’s foundry operations. As Intel works to stabilize its faltering chip manufacturing division, this development has sparked renewed interest in the company’s future.
According to Reuters, the proposed consortium, which also includes Broadcom, would take over Intel’s foundry activities. These operations are responsible for producing chips for both Intel and third-party clients. The news comes as Intel reported a net loss of $18.8 billion in 2024, with its foundry division alone accounting for an operating income loss of $11.6 billion.
Following the announcement, Intel stock climbs by nearly 3% in afternoon trading, adding to its year-to-date gain of 1.6%. However, the stock remains down 54% over the past 12 months, reflecting broader challenges in the semiconductor sector.
Market Reaction and Broader Implications
Shares of TSMC, Nvidia, and Broadcom also rose on the news, signaling investor optimism about the potential collaboration. Nvidia, the AI chip giant, has seen its stock price drop 14% year-to-date amid concerns about the sustainability of the AI trade and potential impacts from tariffs and export controls. Despite this, Nvidia shares are still up 24% over the past year.
Intel has not commented on the report, but the development highlights the growing pressure on the company to address its financial and operational challenges. The proposed venture could provide a lifeline for Intel’s foundry business, which has struggled to compete with TSMC’s dominant position in the semiconductor fabrication market.
US Chip Manufacturing and Geopolitical Concerns
The talks come as the US government works to secure the future of domestic chip manufacturing. Intel is the largest chip manufacturer in the US, but the country accounts for only 12% of global chip production, down from 37% in 1990. This decline became particularly evident during the COVID-19 pandemic, when chip shortages disrupted industries ranging from consumer electronics to automotive manufacturing.
US officials have also expressed concerns about the potential for geopolitical conflicts, such as a Chinese invasion of Taiwan, and natural disasters disrupting chip supplies. These risks have prompted the US government to take action, including passing the CHIPS Act, which provides billions in funding to support domestic chip production.
Intel’s Foundry Strategy and Leadership Changes
Former Intel CEO Pat Gelsinger had attempted to transform the company’s foundry segment into a third-party chip manufacturing business to rival TSMC. However, progress has been slow, and Gelsinger was ousted last year. Currently, co-CEOs David Zinsner and Michelle Johnston Holthaus are leading Intel until a permanent replacement is found.
Both Intel and TSMC have received significant funding under the CHIPS Act to build new manufacturing facilities in the US. In March, TSMC announced plans to invest $100 billion in new plants in Arizona, in addition to the $65 billion already allocated for the region.
What’s Next for Intel?
As Intel stock climbs on the news, investors are closely watching how the company navigates its challenges. The potential collaboration with TSMC, Nvidia, and AMD could mark a turning point for Intel’s foundry business, but significant hurdles remain. For more insights on the semiconductor industry, check out our analysis on semiconductor industry trends in 2024.
For now, the market remains cautiously optimistic, with Intel’s future hinging on its ability to adapt to the rapidly evolving chip manufacturing landscape.
