Things have not been going well for chip stock Intel (INTC) these days, thanks to a series of issues that ended with Intel frantically trying to raise capital, doing everything from mass layoffs to stock sales to draw in more money. In addition, it recently held talks with investment bank SoftBank (SFTBY) to discuss developing an artificial intelligence (AI) chip that would compete with Nvidia (NVDA), according to the Financial Times. That would have been a coup, and it would likely make Intel much more of a corporate powerhouse.
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However, no deal was reached as the Japanese banking group had some rather stringent requirements for Intel. SoftBank had some rather onerous expectations in terms of speed and production capacity, and Intel just couldn’t keep up. Still, there are some signs that SoftBank may be interested in coming back to talk to Intel, particularly since, as it turns out, there are not that many chip makers that can actually make AI chips. As a result, Intel shares were up over 3% at the time of writing.
Intel Has some Negotiating Leverage
This news comes at a particularly interesting junction of events. Just 10 days ago, we found out that SoftBank was on the skids, with its share price reaching a historic low not seen since 1998. But it also gives Intel some negotiating leverage.
Intel needs cash. It sold off its ARM Holdings (ARM) stock, suspended its dividend, fired a huge swath of its workforce, and has been pushing for greater efficiency out of those that remain. At the same time, SoftBank needs some successful investments. Intel is still one of the only companies out there that can put out AI chips, and with Nvidia stitching up the AI chip market nicely, it is a good time for a competitor like Intel to come in, which it absolutely could do under the right conditions.
Is Intel a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 24 Holds, and five Sells assigned in the past three months, as indicated by the graphic below. After a 37.61% loss in its share price over the past year, the average INTC price target of $27.54 per share implies 34.15% upside potential.
