Intel investors have been reacting positively to its recent announcement of a change to a joint-venture arrangement — and another a similar catalyst may be on the horizon.
The chip maker said Wednesday that it will repurchase Apollo Global Management’s 49% equity interest in a joint venture related to its Fab 34 in Ireland, for $14.2 billion. UBS analyst Timothy Arcuri called that “a very big first step to reinject operating leverage into” Intel’s funding model for its chip-fabrication facilities.
Intel’s stock rose 4.9% on Thursday, after surging 8.9% in Wednesday’s session. While some of the recent momentum could be attributed to broader market action, Intel was one of the best stock performers in the S&P 500 during each of the last two sessions.
Intel’s Semiconductor Co-Investment Program (SCIP) allows it to partner with investors to fund the expansion of its manufacturing efforts while keeping majority control.
“We have long argued that it has been challenging to see much earnings power here in large part due to these SCIPs,” Arcuri said in a Wednesday note.
Intel also has a SCIP with Brookfield Asset Management for its chip fabs in Arizona, which Arcuri thinks is “the larger drag” on the company. In his view, Intel would benefit from leaving that partnership next.
“Ultimately, the direction of travel here is very positive and we would view an exit from the Brookfield SCIP as an even more important catalyst to get more positive on the shares,” Arcuri said, adding that an associated repurchase by Intel would likely cost between $20 billion and $30 billion.
That wouldn’t be unfeasible for Intel, Arcuri said, especially if the company can get “material” prepayments from customers for chips built on its upcoming 14A process node. Intel could also monetize its stakes in Mobileye and Altera and take on more debt, he noted.
Additionally, Arcuri said he doesn’t think Intel would’ve retaken ownership of the Ireland fab if it didn’t have “a good line of sight over potential foundry wins.” Fab 34 mostly produces central processing units on the Intel 3 and Intel 4 process nodes for commercial and consumer products.
D.A. Davidson managing director Gil Luria said the market was “continuing to reward Intel” for the Ireland announcement.
“Not only does it indicate Intel was in a financial position to buy back this stake, it is also accretive to earnings, which should cause upward revisions to estimates,” he said in emailed comments.
Investors have been looking at Intel’s latest 18A advanced process node for evidence that it can be competitive in chip manufacturing again. Intel released business-focused processers based on 18A in March, just three months after launching the consumer version of the PC chips. The performance of 18A is also crucial for 14A, which is where Intel will hope to attract external customers for its foundry.
Meanwhile, Intel’s server CPUs are seeing surging interest amid an industry shift toward inference, or the process of running artificial-intelligence models. The rise of agentic AI and the push into enterprise AI applications have spurred demand for data-center CPUs to the point of interrupting some supply for consumer electronics.
Intel’s Fab 34 is “a very important asset for Intel, and with the need to ramp production, it shows that the market is buying Intel products at scale,” Jack Gold, principal analyst at J.Gold Associates, told MarketWatch in emailed comments.
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