The idea that the American people should own a piece of chip stock Intel (INTC) has proven a bit controversial of late. But it also has an unexpected proponent, as Sen. Bernie Sanders came out in support of the plan to get an equity stake in Intel in exchange for its CHIPS Act payments. The move did not sit so well with current shareholders, who sent Intel shares down fractionally in Thursday afternoon’s trading.
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Sanders came out with a line that was, for him, oddly reasonable. “If microchip companies make a profit from the generous grants they receive from the federal government, the taxpayers of America have a right to a reasonable return on that investment.” And oddly enough, it does not stop there. Reports note that the Pentagon is about to become a majority shareholder in a company that is out to find rare earth magnets. Not to mention the deal with U.S. Steel (X) that allowed Nippon Steel to step in to begin with.
So while it is odd to see any Democrat—even a former one like Sanders, who turned Independent but caucuses with Democrats—agree with Trump, the idea does stand on its own. Companies that get the American people’s money to carry out business—especially business that has a national security component to it like chip manufacture—probably should expect to cut the American people in on the deal.
Another Call for Disassembly
Meanwhile, the drumbeat of analysts calling for Intel to break itself apart to survive continues, and this time, The Economist stepped in to suggest just such a course of action. Though it is clear that America is behind in the chipmaking stakes—most of the chips that our technology depends on come mostly from Taiwan Semiconductor Manufacturing Co. (TSM)—perhaps Intel as it stands is not the company to fill in the gap.
Meanwhile, Intel’s foundry operations are foundering. There are signs Intel may have to pull out altogether if it cannot find external customers to buy the chips made. Meanwhile, there are fabless chipmakers out there like Broadcom (AVGO) that might take an interest. And the 18A process at Intel has plenty of life in it, so perhaps, now is the best time for Intel to sell while it can.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 26 Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 17.11% rally in its share price over the past year, the average INTC price target of $22.34 per share implies 4.53% downside risk.
