Intel wild week leaves Wall Street uncertain about chipmaker’s future

It was quite a week for Intel.

The chipmaker, which has lost over half its value this year and last month had its worst day on the market in 50 years after a disappointing earnings report, started the week on Monday by announcing that it’s separating its manufacturing division from the core business of designing and selling computer processors.

And late Friday, CNBC confirmed that Qualcomm has recently approached Intel about a takeover in what would be one of the biggest tech deals ever. It’s not clear if Intel has engaged in conversations with Qualcomm, and representatives from both companies declined to comment. The Wall Street Journal was first to report on the matter.

The stock rose 11% for the week, its best performance since November.

The rally provides little relief to CEO Pat Gelsinger, who has had a tough run since taking the helm in 2021. The 56-year-old company lost its long-held title of world’s biggest chipmaker and has gotten trounced in artificial intelligence chips by Nvidia, which is now valued at almost $3 trillion, or more than 30 times Intel’s market cap of just over $90 billion. Intel said in August that it’s cutting 15,000 jobs, or more than 15% of its workforce.

But Gelsinger is still calling the shots and, for now, he says Intel is pushing forward as an independent company with no plans to spin off the foundry. In a memo to employees on Monday, he said the two halves are “better together,” though the company is setting up a separate internal unit for the foundry, with its own board of directors and governance structure and the potential to raise outside capital.

For the company that put the silicon in Silicon Valley, the road to revival isn’t getting any smoother. By forging ahead as one company, Intel has to two clear two gigantic hurdles at once: Spend more than $100 billion through 2029 to build chip factories in four different states, while simultaneously gaining a foothold in the AI boom that’s defining the future of technology.

Intel expects to spend roughly $25 billion this year and $21.5 billion next year on its foundries in hopes that becoming a domestic manufacturer will convince U.S. chipmakers to onshore their production rather than relying on Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung.

That prospect would be more palatable to Wall Street if Intel’s core business was at the top of its game. But while Intel still makes the majority of processors at the heart of PCs, laptops, and servers, it’s losing market share to Advanced Micro Devices and reporting revenue declines that threaten its cash flow.