Intel: Shares Surge 6% on Potential Nvidia and Broadcom Deals
Shares of Intel Corp. are rising by about 6% in pre-market trading on Monday, following a report from Reuters suggesting that the company’s Intel Foundry Services (IFS) division could soon secure major clients. The report highlights growing interest from Nvidia Corp. and Broadcom Inc., two of the world’s largest chip developers, in Intel’s 18A process technology.
What is it all About
According to sources cited by Reuters, both Nvidia and Broadcom are conducting new tests on Intel’s 18A fabrication process, an advanced node that the company claims offers superior power efficiency and performance. If the tests prove successful, the companies may choose Intel as a key manufacturing partner, potentially bringing in contracts worth hundreds of millions of dollars.
This development comes at a crucial time for Intel, as its foundry business has been struggling to compete with industry leader Taiwan Semiconductor Manufacturing Co. (TSMC) and South Korea’s Samsung Electronics. Intel’s foundry division saw a 60% decline in revenue last year, and the company does not expect this segment to reach break-even profitability before 2027. A deal with Nvidia and Broadcom would be a significant vote of confidence in Intel’s ability to manufacture cutting-edge chips for third-party clients.
Intel has long argued that its 18A process technology provides a technological edge over competitors. The company claims that the node, which is expected to be fully operational by late 2024, will deliver better transistor performance and energy efficiency compared to TSMC’s N3 and N2 nodes. Winning over clients like Nvidia and Broadcom would help validate Intel’s claims and strengthen its position in the foundry market.
The Broader Market
In addition to Nvidia and Broadcom, reports indicate that Advanced Micro Devices Inc. (AMD) is also considering whether Intel’s 18A process meets its needs. This is particularly notable, as AMD has historically relied on TSMC for its chip manufacturing. If Intel can attract multiple high-profile clients, it could challenge TSMC’s dominance in advanced semiconductor manufacturing.
The market has reacted strongly to this news. In pre-market trading, Intel’s stock has surged 6%, while Broadcom’s shares are up 2%. However, Nvidia’s stock is down 0.8%, potentially reflecting concerns about shifting supply chain dynamics. Meanwhile, AMD has gained 1.2%, as investors speculate on its potential involvement in Intel’s foundry business. If these partnerships materialize, Intel could be on its way to a major turnaround in the competitive semiconductor landscape.
Intel’s repeated delays in advancing its manufacturing process could exacerbate its loss of technology leadership to competitors like TSMC, putting pressure on its core x86 business and margins.
Intel’s ambitious IDM 2.0 strategy, which includes expanding its internal manufacturing capacity and offering foundry services to third parties, could create a new revenue stream and diversify the business.
Dr. Viktor Kalm is a Senior Investment Analyst at Alpha Spread. He has over seven years of experience in corporate finance, specializing in financial modeling, business valuation, and strategic planning services. Previously, as a hedge fund manager, he focused on private equity management, consistently delivering positive returns to his clients.
Dr. Viktor Kalm is a Senior Investment Analyst at Alpha Spread. He has over seven years of experience in corporate finance, specializing in financial modeling, business valuation, and strategic planning services. Previously, as a hedge fund manager, he focused on private equity management, consistently delivering positive returns to his clients.
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