There is little doubt that chip stock Intel (INTC) set up a winner of a deal with Tesla (TSLA) to handle some of the duties around Tesla’s upcoming Terafab system. But there are still quite a few outstanding questions as to just how it works, and who does what, and for how much. The details did not seem to annoy investors, though, as Intel shares gained nearly 1.5% in Friday’s trading.
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Trade TSLA with leverageSome of the issues outstanding are fairly straightforward. No one knows exactly how big this deal is, because financial terms were never disclosed. If Intel stood to make millions, even billions, on the deal, it would be exactly the kind of thing investors would want to know about. Intel needs customers, and cash flow to offset the huge amount of cost it put into building its foundry system out.
But beyond that, no one knows what Intel is actually contributing to this deal, how much chip customization Tesla will want, or even who actually owns the resulting intellectual property. Just to top it off, who will actually build the chips as part of Terafab’s operations? These points are all outstanding yet, and there are no signs that either Intel or Tesla plans to clue anyone in.
Another New Project
Leaving aside that pile of unanswered questions, Intel is also working on a new chip that packs in a lot of power. A combination of gallium nitride (GaN) and silicon semiconductors are coming together to form a whole new chiplet that represents a substantial step forward.
Reports note that this combination will produce a kind of power chip that can handle basic computations and similar actions by itself. That means an additional chip that “dictates behavior” is also not called for. Throw in improvements in power delivery and temperature operations and the new chiplet has a real potential for use in data center operations. That could mean big business for Intel.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on seven Buys, 24 Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 212.66% rally in its share price over the past year, the average INTC price target of $49.70 per share implies 20.9% downside risk.
