Intel shares powered higher in early Tuesday trading, extending their best weekly gain in four decades, following reports of a potential deal that could see Taiwan Semiconductor involved in the split of the biggest U.S. chipmaker.
Intel (INTC) shares have added around $20 billion in value over the past two weeks amid speculation that the group's plans to spin-off its money-losing foundry business, put in place as part of the turnaround plan under former CEO Pat Gelsinger, could involve both TSMC and have the support of the new Trump administration.
The Wall Street Journal added to that narrative with a report suggesting that not only is TSMC looking to participate in Intel's foundry spin-off, but chipmaker Broadcom (AVGO) is also keen on making a play for its chip design business.
Intel has made no secret of its plans to spin-off the business that makes chips for other companies, Intel Foundry Services IFS), into a stand-alone unit with an independent board, but hasn't indicated a desire to sell any or all of its design and marketing business.
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That said, the group is still being run by co-CEOs David Zinsner and Michelle Johnston following Gelsinger's ouster in December and posted only a muted set of fourth quarter earnings while indicating a new focus on AI-related products for its data center division.
Intel IFS split a 'done deal'?
Cantor Fitzgerald analyst C.J. Muse thinks the planned split its nearly a "done deal" at this point, given the new administration's desire for a U.S.-based foundry operator and comments from Vice President J.D. Vance at last week's AI summit in Paris.
"To safeguard America's advantage, the Trump administration will ensure that the most powerful AI systems are built in the US with American designed and manufactured chips," Vance said.
Taiwan President Lai Ching-te, meanwhile, said Friday that his government would increase U.S. investment in the chip sector in order to help create a "democratic supply chain" for advanced AI chips.
Muse, who raised his Intel price target by $7, taking it to $29 per share in a note published Tuesday, said that while Taiwan Semi would be the "clear strategic winner" in any IFS deal, Intel would still be a longer-term beneficiary.
"We believe the current Administration is worried about lack of leadership and current net leverage at Intel (have not found new CEO; negative FCF) and does not want a GM-like situation to emerge for the US’ Crown Semiconductor Jewel," said Muse.
"Thus, we believe the probability of a separation of Intel Design-Co and Intel Foundry Services is significantly higher today, with the key question being who runs IFS," he added.
Related: Analyst revisits Intel stock forecast amid surprise plans for a key spinoff
Muse thinks a formula based on Taiwan Semi's European foundry joint venture will be used as the blueprint for the IFS spin-off, with the company getting at least a 51% ownership share and 100% control of the newly-separated asset.
"To help fund the JV, we would expect the US Government to participate (see recent comments on US Sovereign Fund) as well as potential equity commitments from key fabless players in the US including Apple (AAPL) , Nvidia (NVDA) , AMD (AMD) , and Qualcomm (QCOM) ," Muse said.
Intel a tactical long - Cantor Fitzgerald
That would likely boost the current value of IFS, which has been a drag on Intel's overall valuation, while simultaneously enhancing the worth of any stand-alone chip design company with close ties to the new fab business and likely support from Chips Act funding.
"Intel is a tactical long as it appears the board of directors is focused intently on delivering value to existing shareholders," Muse said, while the IFS spin-off would allow it to "truly focus more aggressively on its x86 product businesses."
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Morgan Stanley analysts, lead by Joseph Moore, however, notes that Taiwan Semiconductor has said that while it plans to expand its U.S. chip manufacturing presence, it isn't interested in partnering with Intel.
"We think further US fab expansion is possible," the bank said. "In a previous report, we mentioned TSMC will pass through tariffs to US customers, so US customers may ask for more US production to reduce tariff risks."
Intel shares were last marked 12.7% higher in late Tuesday trading to change hands at $26.59 each, the biggest single day gain in nearly two years and a move that would peg the stock's two-week gain at around 40%.
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