Intel stock rose on Tuesday after the beleaguered chipmaker announced funding from the U.S. government and an alliance with Amazon Web Services. Intel also announced moves to shore up its operations, including establishing an independent subsidiary for its foundry business.
The actions were generally well received on Wall Street, but most analysts still recommend staying clear of Intel stock. Of 45 analysts who cover Intel stock, three have buy ratings, 36 have hold ratings and six have sell ratings, according to Wall Street Journal data.
Late Monday, Intel Chief Executive Pat Gelsinger sent a message to employees announcing "the next phase of Intel's transformation."
He said the move to make Intel Foundry an independent subsidiary will provide a "clearer separation" for customers and suppliers. It also will allow the business to "evaluate independent sources of funding."
Meanwhile, Intel is pausing plans to build manufacturing plants in Poland and Germany by about two years. The company also intends to reduce or exit about two-thirds of its real estate holdings by the end of the year. Those actions follow cost-reduction plans that Intel announced on Aug. 1.
Plus, Intel plans to sell a stake in its Altera unit, ahead of an eventual initial public offering, Gelsinger said.
Amazon Deal Advances U.S. Chipmaking
After the market close on Monday, Intel also announced a strategic collaboration with Amazon Web Services, the cloud computing unit of Amazon.com. The two companies will invest in custom chip designs under a "multiyear, multibillion-dollar framework covering product and wafers from Intel."
As part of the collaboration, Intel will produce an AI fabric chip for AWS on Intel 18A, the company's most advanced process node.
Intel said the deal will help advance U.S.-based chip manufacturing.
Earlier Monday, Intel announced an award of up to $3 billion in direct funding from the U.S. government under the Chips and Science Act for the Secure Enclave program. Intel will supply chips for U.S. Defense Department programs.
Intel Stock Rises After News
On the stock market today, Intel stock rose 2.7% to close at 21.47. On Monday, Intel stock jumped 6.4% to close at 20.91.
The latest Intel news "moves (the) patient from life support to critical condition," Jordan Klein, a trading-desk analyst with Mizuho Securities, said in a client note Tuesday.
"If there was ever a company and stock in need of some positive news flow it was Intel," Klein said. "Shares were down 60% year to date and grinding lower and lower vs. (the) semi sector up 34% year to date."
Intel's transformation efforts are headed in the right direction, but the associated costs will weigh on the company's financials for at least the next year, Deutsche Bank analyst Ross Seymore said in a report. He rates Intel stock as hold with a price target of 27.
BofA Securities analyst Vivek Arya said Intel's operational update "leaves more questions than answers." He reiterated his underperform rating on Intel stock with a price target of 21.
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