Stock Story -
What Happened: Shares of computer processor maker Intel (NASDAQ:INTC) jumped 7.5% in the afternoon session after the Wall Street Journal reported the company (Intel) was approached by fellow chip designer Qualcomm (NASDAQ:QCOM) for a potential takeover. In most takeovers, acquirers offer a premium price over a company's market value to encourage shareholders to sell their shares. Intel's stock was down more than 50% year to date when the acquisition rumors surfaced, which means the potential premium offered in a takeover could be attractive to shareholders.
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What is the market telling us: Intel’s shares are very volatile and over the last year have had 20 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago, when the stock gained 11.4% on the news that the company announced a "multi-year, multi-billion-dollar partnership" to make AI (artificial intelligence) chips for Amazon (NASDAQ:AMZN). According to its press release, Intel will produce an AI fabric chip using its most advanced 18A process node and a custom chip using Intel 3 for AWS (Amazon Web Services).
AWS CEO Matt Garman added. "By co-developing next-generation AI fabric chips on Intel 18A, we continue our long-standing collaboration, dating back to 2006 when we launched the first Amazon EC2 instance featuring their chips."
Equally supportive of the positive price action, Intel announced plans to convert its Foundry business into a separate entity. The move will allow the unit to have its board and attract outside funding from investors.
Wall Street analysts provided constructive updates on the move, with Harlan Sur of JP Morgan (NYSE:JPM) adding, "We believe this move is a natural progression to drive better transparency and decision making/efficiencies and therefore should not be viewed as a surprise."
Intel is down 53.8% since the beginning of the year, and at $22.08 per share it is trading 56.5% below its 52-week high of $50.76 from December 2023. Investors who bought $1,000 worth of Intel’s shares 5 years ago would now be looking at an investment worth $435.33.
