Intel shareholders are finally getting used to good news again. The financial giant Apollo Global Management appears poised to offer an equity-like investment of as much as $5 billion in the distressed U.S. chipmaker, according to a report from Bloomberg on Sunday. The move would be a major vote of confidence in the recovery effort led by Intel CEO Pat Gelsinger, which has till now brought only worsening earnings reports and a plunging stock price.
Intel has shed over $100 billion in market cap this year with shares falling over 50% as one of Silicon Valley’s original powerhouses struggles to remake itself. The stock surged 5% in premarket trading Monday on the Apollo news and remains up roughly 1.5% from Friday’s close, however, building off last week’s gains.
News of a deal with Amazon Web Services to produce an advanced AI chip and the company’s plans to spin off its struggling foundry business have helped shareholders get a much-needed reprieve, with shares rising 14.5% over the previous two weeks.
Apollo offer follows news of potential Qualcomm takeover
Apollo’s offer comes shortly after news that chipmaking rival Qualcomm has approached Intel to explore a friendly acquisition. A deal would be one of the largest in the history of M&A, but it would almost inevitably face regulatory hurdles.
It would also underline just how far Intel has fallen from the semiconductor mountaintop. Once the world’s largest chipmaker, Intel’s market cap of $93 billion is now roughly half of that of Qualcomm. Shares of Intel rose 3.4% Friday on reports of Qualcomm’s approach, while the stock of the San Diego-based company dropped 2.9% as investors considered the risks of such a deal.
Intel, meanwhile, continues to wrestle with cost and competitive pressures. The market for traditional PC chips, or CPUs, has traditionally been Intel’s bread and butter business. It’s faltered, however, under competition from Advanced Micro Devices, or AMD, whose cheaper and more efficient ARM-CPUs have caused Intel to lose market share.
On its face, the company also appeared poised to take advantage of the AI boom. In reality, the company hasn’t produced anything that can hold a candle to Nvidia’s GPUs, or graphic processing units, which are all but essential for companies training GenAI models. Intel's foundry business, which is becoming an independent subsidiary, fell well behind the likes of TSMC.
Amid another disappointing earnings release and a dim forecast, the company announced in August it would reduce its workforce by 15%, a loss of roughly 15,000 employees, as a part of a $10 billion cost-cutting effort.
In the pursuit of semiconductor supremacy, however, the U.S. government remains in Intel’s corner. Last week, the Biden administration announced it would award Intel up to $3 billion in CHIPS Act funding as part of an effort called the Secure Enclave, which aims to ensure a steady supply of cutting-edge chips for defense and intelligence purposes. That’s in addition to a $8.5 billion grant awarded to the company in February for building several major plants.
That sort of backing appears to have Apollo, the famed alternative asset manager founded by Marc Rowan, Leon Black, and Josh Harris, betting on a turnaround. The firm, which boasts nearly $700 billion in assets under management, per PitchBook, has worked with Intel before. Earlier this year, Apollo said it would buy an $11 billion stake in a joint venture that controls Intel’s new manufacturing facility in Ireland.
