Intel stock (INTC) soared in early trading Monday following a Bloomberg report about a potential multibillion-dollar investment by Apollo Global Management. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
The private equity firm plans to invest up to $5 billion in Intel, Bloomberg reported, adding that Intel executives are considering the proposal. The news follows multiple reports that the company is considering a friendly acquisition by another semiconductor giant, Qualcomm (QCOM).
Intel shares rose more than 3% on Monday after the stock rose more than 3% on Friday on speculation about a deal with Qualcomm.
Qualcomm investors don’t seem too happy about reports of talks with Intel. The company’s stock price fell about 3% on Friday and about 1.8% on Monday.
Intel and Apollo have an existing relationship. In June, the chipmaker sold Apollo an $11 billion stake in its Irish manufacturing facility.
The interest in Intel and subsequent stock price rise is welcome news for technology companies struggling to find a foothold in new markets dominated by AI. Intel’s stock price has fallen nearly 57% since the beginning of 2024. In August, the company announced it was aiming to cut costs by $10 billion by laying off 15% of its workforce and pausing some projects in Europe.
Intel lags behind rivals Nvidia (NVDA) and Advanced Micro Devices (AMD), whose advanced AI chips are worth billions of dollars and attracting the attention of Big Tech companies.
And Intel’s Gaudi AI processors aren’t gaining traction at Amazon (AMZN), Google (GOOG), or Microsoft (MSFT). That’s because it debuted after tech giants started working on developing their own AI chips, Moor Insights CEO Patrick Moorhead told Yahoo Finance in a recent interview.
Intel CEO Pat Gelsinger speaks at an event called AI Everywhere on Thursday, December 14, 2023 in New York. (AP Photo/Seth Wenig, File) (ASSOCIATED PRESS)
Meanwhile, Qualcomm’s acquisition would be the largest technology merger since Microsoft acquired Activision Blizzard for $69 billion. A deal of this size is likely to attract unwanted attention from federal antitrust regulators, who have increased their scrutiny of the tech industry in recent years.
“The Qualcomm-INTC deal is similar to other proposed megadeals that have failed to clear high regulatory hurdles, including NVDA’s proposed acquisition of ARM Holdings, Broadcom’s proposed acquisition of Qualcomm, and Qualcomm’s attempted acquisition of NXP Semiconductor. Regulatory approval is unlikely,” Stifel analysts wrote in a note to investors on Monday.
Some analysts argue that even if successful, a Qualcomm merger would not necessarily be good for Intel or its shareholders, and that Intel should exit the chip manufacturing business altogether.
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“Intel is exiting the foundry business in the best interest of shareholders because we believe it is highly unlikely that Intel will become a profitable cutting-edge foundry,” Citi analysts wrote in a Monday note. We continue to believe that we should.” Intel’s foundry business makes chips for other companies.
“It’s hard to make trades where you think the risk is worth the return,” Bernstein senior analyst Stacey Rasgon also told Yahoo Finance on Monday.
Qualcomm and Apollo are interested in Intel because the company is also trying to build its own momentum. Last week, CEO Pat Gelsinger announced an expanded multibillion-dollar partnership with Amazon and $3 billion in CHIPS Act funding from the U.S. government.
“This news, combined with the AWS announcement, demonstrates our continued progress toward building a world-class foundry business,” Gelsinger said in an announcement last Wednesday.
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Laura Bratton is a reporter for Yahoo Finance.
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