Apple’s (AAPL) shares closed Friday’s trading about 2% higher following reports that the consumer electronics giant has reached an initial agreement with chipmaker Intel (INTC) to produce some of the chips to power its devices.
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An Apple-Intel Chip-Making Deal?
According to the Wall Street Journal, which broke the news based on insider information, both parties have been engaged in discussions about such an arrangement for over a year. The progress marks the latest in Apple’s efforts to diversify beyond its major chip supplier, Taiwan Semiconductor Manufacturing Company (TSM), which is the world’s largest contract chip manufacturer.
Shares in Intel — which has been pushing to give its foundry business a boost — got a significantly larger stock boost from the reported preliminary deal. Its shares wrapped up Thursday’s trading on a high note, up roughly 14% following the report.
Chip Supply Shortage Limits Apple’s Growth
Reports of the deal come as an industry supply crunch due to elevated data center demands continues to limit Apple’s ability to meet surging demand for its flagship iPhone smartphones and Mac computers. Earlier reports had suggested Apple was also looking to tap its smartphone rival Samsung (SSNLF) to manufacture some of its chips.
In its second-quarter earnings report released late last month, Apple crushed analysts’ estimates for its results, with the “extraordinary demand” for its iPhone 17 lineup helping to push its revenue up by about 17% year-over-year to $111.2 billion. However, CEO Tim Cook during the quarterly earnings call pointed out the shortage of chips for the iPhone and Mac was limiting the company’s growth.
Cook also noted that the consumer electronics giant now had less flexibility in the supply chain than it would typically have.
Is Apple Still a Good Stock to Buy Now?
On Wall Street, analysts’ consensus rating on Apple’s shares remains a Moderate Buy. This is based on 17 Buys, 10 Holds, and one Sell assigned by 28 analysts over the past three months.
Moreover, the average AAPL price target of $314.78 only implies about 7% upside.
