A win for chip maker Intel (INTC)? Yes, it has happened, and Intel is up over 6% in Monday afternoon’s trading, thanks to the news. Intel landed a major new deal with the U.S. government, and not for free money and cheap loans, either, but for actual chip sales.
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The latest word from Bloomberg says that Intel qualifies under the Secure Enclave program and, as such, can get in on $3.5 billion in federal grants that will see Intel make chips for the Pentagon. With chips increasingly a major part of military operations, having a reliable domestic source is vital. And thus, Intel—with its Arizona facility as well as several others—became perfectly suited to supply that need.
However, with Intel already in line for quite a bit of federal money through the Chips and Science Act—though that’s somewhat in doubt right now—some are pointing out that maybe it would be a good idea to develop more than one such source. This is because single suppliers are great as long as nothing goes wrong.
Troubles and Solutions
Things got a little worse from there as a Reuters report detailed how Intel ultimately lost Sony’s (SONY) business. Back in 2022, Intel lost the contract to make chips for the upcoming PlayStation 6 to AMD (AMD). That meant about $30 billion in revenue that would have been Intel’s was now out the door to AMD instead, thanks largely to “disputes over profit margins.”
And worse, Intel is now down to the bare bones in terms of ways to cut costs. Reports noted that Intel has now cut out “coffee stations” and “phone benefits.” The reports from Calcalist noted that Intel offered mobile phone plans to large numbers of employees and had “luxurious coffee stations,” but now, those are being pared back. A Dilbert strip took on the concept once, with Catbert announcing cutbacks that eliminated free soft drinks, then free bottled water and coffee, before ultimately requiring workers to no longer swallow their own saliva.
Is Intel a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 26 Holds, and six Sells assigned in the past three months, as indicated by the graphic below. After a 44.46% loss in its share price over the past year, the average INTC price target of $26.09 per share implies 24.95% upside potential.
