The good news for chip maker Intel (INTC) is that it is in line to get a solid cash infusion from the federal government thanks to the U.S. Chips and Science Act. New reports, however, suggest that it may not be that simple. But investors are taking this surprisingly well and sent shares of Intel up fractionally in the closing minutes of Monday’s trading.
New reports suggested that Intel’s recent moves may be putting its federal money in jeopardy. The point of Intel getting that money was so that it could better establish itself as an American chip manufacturer. However, with the word coming out that Intel is cutting back on its chipmaking, that means the cash it was in line to get might not show up after all.
Intel was in line to land $19.5 billion worth of grants and loans, but it has yet to actually receive any of that money. Moreover, reports note that the officials handling the money won’t actually fork any over to Intel until it actually shows progress on building chips in the United States. However, there is a decline in overall chip demand, and that is leaving Intel on the back foot.
This Won’t Help
Intel might protest here that it is indeed working toward being a domestic chip producer, but the new reports about its connection to TSMC (TSM) likely will not help much. Commercial Times noted that Intel has outsourced all of its sub-3nm process work to TSMC. Intel is not only not fabricating chips; it is also subcontracting out its work on this front, in at least some cases.
However, not all the processing work is going; we know that Intel is keeping its wafer foundry operations up and running. However, that is not going so well; recently, Broadcom (AVGO) landed a shipment of Intel products put together using Intel’s best manufacturing process, referred to as the 18A process. Those products were found to be deficient, suggesting that the 18A process simply is not ready for prime time.
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 49.79% loss in its share price over the past year, the average INTC price target of $26.09 per share implies 36.92% upside potential.
