It was big news for chip stock Intel (INTC) today as the formerly cash-strapped giant landed a hefty new slug of funding from no less than SoftBank (SFTBY). SoftBank is tossing a whopping $2 billion into Intel’s coffers, and the other investors exploded. Intel shares jumped nearly 7% in Tuesday afternoon’s trading.
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SoftBank will pay $23 a share for Intel stock, which was a slight discount over the $23.66 per share that Intel closed at on Monday. But SoftBank’s investment by itself represents about 2% of Intel’s total value, reports note, and this makes SoftBank Intel’s fifth-largest single shareholder. Intel has been frantically cutting employees and entire divisions in a bid to save cash, and now, Intel will have quite a bit of new working capital to work with.
CEO Lip-Bu Tan expressed gratitude for the new investment, saying “Masa (Masayoshi Son, founder of SoftBank) and I have worked closely together for decades, and I appreciate the confidence he has placed in Intel with this investment.” This move actually made a certain sense. SoftBank has been increasingly getting involved with AI and chip markets, and Intel—thanks to its recent losses—may have made a good way to get involved for a comparative bargain.
A Big New Shareholder Already
But SoftBank may not be the only big new shareholder Intel has. Commerce Secretary Howard Lutnick recently talked to CNBC, and revealed that the CHIPS Act money Intel already received apparently had some hefty strings attached. Lutnick said that the United States government must “…receive an equity stake in Intel in exchange for CHIPS Act funds.”
Yet another remark Lutnick made casts a bit of doubt on the notion. Lutnick also said, “So we’ll deliver the money, which was already committed under the Biden administration. We’ll get equity in return for it.” Further, Lutnick said, “The Biden administration literally was giving Intel for free, and giving TSMC (TSM) money for free, and all these companies just giving them money for free.” But if those deals are already made, how far can the Trump administration take a sudden demand for equity in exchange?
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 27 Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 12.72% rally in its share price over the past year, the average INTC price target of $22.15 per share implies 12.14% downside risk.
