MW Intel's stock is rising on takeover hopes. But does any buyer really make sense?

By Emily Bary

A tech publication writes of the 'near certainty' that a company is interested in buying Intel. But it's not clear who might fit the bill.

How much longer will Intel Corp. remain an independent company?

Wall Street is again mulling the prospect that Intel $(INTC)$ will get acquired, this time following a report from SemiAccurate, a technology news site, describing a mystery company's interest in purchasing the beaten-down semiconductor maker. Intel's stock is up nearly 7% in Friday action.

Intel has struggled in recent years, missing the boat on artificial intelligence, an area where customers have opted for graphics processing units made by Nvidia Corp. $(NVDA)$ and Advanced Micro Devices Inc. $(AMD)$ rather than Intel's central processing units. Intel has also shed market share to AMD in more traditional businesses, and the company has been weighed down by a costly bet on manufacturing.

Ever since Intel announced a drastic restructuring plan last year, speculation has swirled about a potential takeover of at least part of the company. The Wall Street Journal reported in September that Qualcomm Inc. $(QCOM)$ might be interested and had approached the company about a possible deal.

SemiAccurate, however, wrote Friday that it "was read an email about a company that was looking to buy Intel outright, not parts." And the mystery acquirer, which isn't named in the free version of SemiAccurate's report, isn't a company whose name was previously floated by media outlets after former CEO Pat Gelsinger's exit, nor has the mystery company expressed interest publicly, the article said.

Beyond hearing the contents of the email, SemiAccurate also talked to another source. "This took SemiAccurate from about 60% confidence in the plan being real to more than 90%," the article said. "Subsequent conversations have moved it to the point of near certainty."

But could Intel actually get bought? For another company to acquire Intel, it would need to have both an interest in doing so and the necessary capital. It's not immediately clear what company might fit that bill.

Intel didn't immediately respond to a MarketWatch request for comment.

The company ranks 15th in the PHLX Semiconductor Index SOX based on its market capitalization of about $92 billion. Five of the companies above it have market capitalizations roughly in the same vicinity and have businesses largely unrelated to what Intel does, making them unlikely candidates.

How about the other SOX components that are bigger than Intel? Nvidia is the largest, but it's hard to see why the company would want to involve itself in a loss-making manufacturing endeavor as well as a CPU business that's viewed as behind the curve, especially when its own AI offerings are booming.

AMD, with a market cap near $200 billion, operates in many of the same markets as Intel, but the company seems to be profiting now from Intel's missteps. Meanwhile, given the business overlap, it's not a guarantee that a deal between these two companies would pass regulatory muster. AMD also has been struggling to gain ground on Nvidia in GPUs, so trying to turn Intel around might represent a distraction. And AMD offloaded its own manufacturing business nearly two decades ago, so scooping up Intel with all the problems its foundry business is experiencing now doesn't seem likely.

Read: AMD gets another downgrade. Here's why analysts are souring on the stock.

In general, chip companies haven't shown much interest in manufacturing semiconductors themselves, opting to outsource to companies such as Taiwan Semiconductor Manufacturing Co. $(TSM)$. Intel has been trying to get back into TSMC's business of making chips for other companies, but it's been an expensive, uphill battle.

Could TSMC buy Intel? Though TSMC is sizable, with a market cap of nearly $900 billion, management has dismissed interest in Intel's fabs. Broadcom Inc. $(AVGO)$ is large as well, with a roughly $1.1 trillion valuation, but it sees big AI opportunity with its application-specific integrated circuits, and its recent diversification has been more into software - something that's paid off so far.

Quickly running down the other semiconductor-industry players that are bigger than Intel, there's ASML Holding NV (NL:ASML), which makes expensive chip equipment, not actual chips. Qualcomm has been floated as a suitor in the past, but SemiAccurate says the mystery company is one that hasn't been in the public conversation. Beyond those, Texas Instruments Inc. $(TXN)$ is an analog chip company that serves different markets than Intel; Arm Holdings PLC $(ARM)$ is a chip designer with lofty margins and seemingly no interest in the world of capital-intensive manufacturing; and Applied Materials Inc. $(AMAT)$ makes chip equipment.

The potential acquirer doesn't necessarily have to be in the semiconductor sector, however. It could potentially be a company in the financial realm that has the confidence in its ability to turn Intel around.

"This mystery company has the resources to pull it off," the story said.

The U.S. government has an interest in Intel's success given how crucial chips are and their propensity to get caught up in geopolitical spats. Intel in particular is important to the U.S. since it manufactures chips domestically. That could make the government more interested in allowing a deal that would bolster Intel's position, though officials might frown on one that would introduce more foreign influence.

See also: Nvidia analysts are very bullish on the stock. But this holdout defends his cautious view.

-Emily Bary

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January 17, 2025 12:37 ET (17:37 GMT)

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