Intel shares (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.)
Bloomberg reported that the private equity firm plans to invest up to $5 billion in Intel and that Intel executives are reviewing the proposal. The news comes on the heels of multiple reports that the chipmaker is considering a friendly takeover by another semiconductor giant, Qualcomm (QCOM).
Intel shares rose more than 3% on Monday after rising more than 3% on Friday on speculation about a deal with Qualcomm.
Qualcomm investors didn’t seem too pleased with the reports of talks with Intel, with the chipmaker’s shares falling about 3% on Friday and about 1.8% on Monday.
Intel and Apollo have had a long-standing relationship: In June, the chipmaker sold an $11 billion stake in its Irish manufacturing facility to Apollo.
The interest in Intel and the resulting rise in its stock price is good news for technology companies struggling to gain a foothold in new markets dominated by AI. Intel’s shares have fallen nearly 57% since the beginning of 2024. The company said in August it would cut $10 billion in costs by laying off 15% of its workforce and suspend some projects in Europe.
Intel has lagged behind rivals Nvidia (NVDA) and Advanced Micro Devices (AMD), whose advanced AI chips have attracted billions of dollars of interest from major tech companies.
Intel’s Gaudi AI processor also hasn’t been endorsed by companies like Amazon (AMZN), Google (GOOG), or Microsoft (MSFT) because the processor came out after the tech giants started developing their own AI chips, Moor Insights CEO Patrick Moorhead said in a recent interview with Yahoo Finance.
Intel CEO Pat Gelsinger speaks at an event called “AI Everywhere” in New York, Thursday, Dec. 14, 2023. (AP Photo/Seth Wenig, File) (The Associated Press)
Meanwhile, Qualcomm’s acquisition would be the biggest tech merger since Microsoft bought Activision Blizzard for $69 billion. A deal of that size would likely attract unwanted attention from federal antitrust regulators, who have stepped up scrutiny of the tech industry in recent years.
“We believe the Qualcomm-INTC transaction is unlikely to receive regulatory approval, similar to other large proposed transactions that have failed to clear significant regulatory hurdles, including NVDA’s proposed acquisition of ARM Holdings, Broadcom’s proposed acquisition of Qualcomm and Qualcomm’s attempted acquisition of NXP Semiconductors,” Stifel analysts wrote in a note to investors on Monday.
Some analysts have said that even if successful, a merger with Qualcomm would not necessarily be good for Intel or its shareholders, and have argued that Intel should exit the chip-making business altogether.
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“We continue to believe that Intel should exit its foundry business in order to maximize shareholder returns, as we believe it is highly unlikely that Intel will be able to become a profitable leading-edge foundry,” Citi analysts wrote in a note on Monday. Intel’s foundry business makes chips for other companies.
Stacey Rasgon, a senior analyst at Bernstein, also told Yahoo Finance on Monday that “it’s hard to make a trade where you think the risk justifies the reward.”
Qualcomm and Apollo’s interest in Intel comes as the company is trying to gain some momentum of its own: Last week, CEO Pat Gelsinger announced an expanded multibillion-dollar partnership with Amazon and $3 billion in funding from the U.S. government under the CHIPS Act.
“Today’s news, coupled with our announcement about AWS, represents our continued progress toward building a world-class foundry business,” Gelsinger said in a statement last Wednesday.
Laura Bratton is a reporter for Yahoo Finance.
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