Morningstar

Intel: Maintaining Fair Value Estimate as Intel Foundry Receives Outside Support

These investments bring us closer to a bullish scenario for Intel stock.

The Intel logo can be seen at the headquarters of the chip company.
Andrej Sokolow/picture alliance via Getty
Securities in This Article
Intel Corp
(INTC)

Key Morningstar Metrics for Intel

Intel INTC announced that SoftBank will buy $2 billion of Intel stock at $23 per share as it invests in US chip manufacturing. Separately, the US government appears to be nearer to a deal to use the CHIPS and Science Act funds to acquire a 10% stake in Intel. Shares rose 7% on the news.

Why it matters: The two deals increase the likelihood of Intel’s foundry business remaining on track to invest in advanced chip manufacturing (Intel 14A), not only for the firm’s internal products businesses, but also for external foundry customers.

  • Intel foundry was unable to secure significant external customer orders for its upcoming 18A process, but a government stake might either incentivize or outright force some large US fabless chip designers to use Intel foundry on 14A.
  • The SoftBank stake could lead to ARM (another SoftBank holding) using Intel foundry, as ARM reportedly aspires to build its own line of semiconductors.

The bottom line: We maintain our $21 fair value estimate for no-moat Intel and retain our Very High Uncertainty Rating. Admittedly, these investments bring us closer to a bullish scenario.

  • While the investments would be good for Intel’s revenue and chip manufacturing within the United States, Intel will still need to invest heavily to bring this production to fruition. 14A is likely uneconomical without an inflow of external orders.

Long view: We also question the profitability of this revenue if the US government is heavily involved in ownership of Intel. Intel might have to offer pricing concessions on these external foundry orders.

  • Also, it’s conceivable that the US government may strive to earn a tax on this foundry revenue, like the proposed deal for the 15% it seeks on Nvidia’s and AMD’s AI GPU sales into China once they receive export licenses.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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