To The Moon

$Qualcomm(QCOM)$ is reportedly knocking on $Intel(INTC)$ 's door with a takeover proposal that could shake up the tech world like no other. We're talking about a potential blockbuster deal, even though it's early days. But the mere thought of these two titans joining forces has the industry all stirred up.

Despite Intel's market cap rising by about $5.5 billion recently, its stock price has halved this year. How did Intel, once the undisputed emperor of the PC CPU realm, find itself in a tight spot, now becoming takeover bait?

Intel's Decline

If we were to compare $NVIDIA Corp(NVDA)$ to an 18-year-old, then Intel is like a 70-year-old, still munching on the goodies from the PC era. Back in the ‘80s, Intel owned up to 90% of the CPU market share, and by 2000, their market value had surged past $500 billion.

But lounging in the PC comfort zone, Intel missed the signposts to the next big tech wave. Intel's CEO, Pat Gelsinger, pointed out that Intel missed the boat on smartphone chips, GPU development, and building a major silicon foundry.

In 2006, they even turned down supplying chips for the iPhone, thinking Jobs’ offer was too low, practically giving away the smartphone chip market on a silver platter. By 2010, when smartphones outsold PCs, it was already too late for Intel.

In the foundry space, $Taiwan Semiconductor Manufacturing(TSM)$ is without peer, something that doesn't sit well with Intel. Despite betting big on its IDM 2.0 strategy to reclaim the chip foundry crown, Intel hardly made a splash.

AI delivered the knockout blow to Intel. Struggling in the transformation quagmire, especially in 2024, Intel saw declining revenue and profits, laid off 15,000 people, and even paused dividends. NVIDIA’s market value is now a whopping 31 times that of Intel.

Qualcomm's Interest

So, why Qualcomm and not another high-flying tech giant like NVIDIA or AMD, for the buyout? Qualcomm flourishes in the realms of communication and mobile SoCs, dominating mobile devices and smart cars, whereas Intel reigns over desktop and server markets. With Qualcomm on the ARM platform and Intel on x86, they’re hardly direct competitors—it’s hardly a merger of equals.

Yet, Qualcomm is eyeing a win-win. If x86 and ARM blend well, it spells great news for Qualcomm's ventures into PCs and AI terminals. Clearly, they don’t want to miss out on Intel while it's down and relatively "cheap."

The Potential Impact

For Qualcomm, partnering with Intel could complement their own offerings and unlock growth in new markets, though it will seriously test Qualcomm's management skills.

Reaching a deal isn’t a walk in the park, though. Financing pressures, business integration, regulatory approvals—all big hurdles. And with investment firms like Apollo showing interest in up to $5 billion equity investments in Intel, nothing's set in stone, and changing investment scales could even break the deal.

But if this potential transaction goes through, it would create a behemoth with a strong foothold in smartphones, PCs, and servers. Qualcomm would speed up its diversification, and Intel might regain its competitive edge during its ongoing transformation. How do you feel about these chip giants potentially merging? Do you think Intel can reclaim its former glory?