Chip giant Intel (NASDAQ:INTC) and Apollo (NYSE:APO) have entered into an agreement. Per the agreement, Apollo will inject $11 billion to secure a 49% equity stake in a joint venture (JV) tied to Intel’s Fab 34 manufacturing facility in Leixlip, Ireland.
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Fab 34 serves as Intel’s high-volume manufacturing hub, primarily specializing in the production of wafers utilizing Intel 4 and Intel 3 process technologies. The venture will focus on manufacturing wafers for both Intel’s internal requirements and external clients, utilizing a cost-plus-margin model.
The transaction will likely close in the second quarter of 2024, with Intel retaining a 51% stake and operational authority over Fab 34.
Benefits of the Deal
This deal is part of Intel’s Semiconductor Co-Investment Program (SCIP), which aims to bolster Intel’s strategy of investing in global manufacturing operations and maintaining financial flexibility. The transaction is designed to enhance Intel’s balance sheet with a low cost of capital.
This partnership allows Intel to diversify its investment pool with a reputable financial collaborator and safeguards its robust investment-grade credit rating. With the construction of Fab 34 near completion, the production of Intel Core Ultra processors utilizing Intel 4 technology is already underway.
Is Intel a Buy, Sell, or Hold?
Intel stock is down about 40% year-to-date, reflecting competitive headwinds and ongoing challenges in the traditional CPU market. Nonetheless, the company is focusing on new product launches and better pricing to gain market share and beat the competition.
Intel stock has lost substantial value so far this year. Despite this notable drop, analysts remain sidelined on INTC stock due to the ongoing challenges.
Intel stock has a Hold consensus rating based on three Buys, 26 Holds, and three Sell recommendations. Analysts’ average price target on INTC stock is $37.83, implying an upside potential of 25.97% from current levels.
