Intel receives moderately positive analyst reactions on US investment

[Silhouette of White House with united state of America flag and stock market chart for USA election president related with economy and investment concept.]
Dilok Klaisataporn

Analysts provided Intel (NASDAQ:INTC [https://seekingalpha.com/symbol/INTC]) moderately positive feedback after it was revealed the U.S. government agreed to a historical $11.1B investment [https://seekingalpha.com/news/4488523-intel-confirms-massive-11_1b-investment-by-us-government] in the chipmaker.

"We see positive implications associated with this transaction as we were previously concerned that the U.S. government's equity stake would likely have other INTC obligations with a potentially activist ownership role," said KeyBanc analysts John Vinh and Ryan Rosumny, in an investor note. "Additionally, with the removal of the clawback on the previous CHIPS Act grant and announced equity transaction, uncertainty associated with whether INTC's Chips Act funding would be reneged is off the table."

Under the deal, the U.S. will buy 433.3M shares at $20.47 each. This equates to a 9.9% stake in Intel, making it the largest investor in the company. It will be a passive ownership, meaning no board representation or other types of governance rights will be grant.

KeyBanc noted that the titan-sized government investment followed a $2B investment from Japan's SoftBank [https://seekingalpha.com/news/4486774-intel-scores-2b-investment-from-japans-softbank-shares-jump-after-hours] (OTCPK:SFTBY [https://seekingalpha.com/symbol/SFTBY])(OTCPK:SFTBF [https://seekingalpha.com/symbol/SFTBF]). SoftBank is heavily invested across the artificial intelligence sector as a primary backer of OpenAI and the majority owner of Arm Holdings (ARM [https://seekingalpha.com/symbol/ARM]).

"In total, the combined U.S. government and SoftBank transactions will likely have a modest dilutive impact of $0.07 on our FY26 EPS estimate of $0.67," Vinh added. "Despite positive implications associated with these equity transactions, we remain Sector Weight."

Meanwhile, T.D. Cowen said the U.S. investment means Intel is less likely to abandon foundry goals.

"We think Intel's disclosure in its 2Q25 10-Q that it may cease development of 14A was as much a message to the US government on its need for firm capital commitments as it was to potential customers," said T.D. Cowen analysts, led by Joshua Buchalter, in a note. "We now think the scenario of Intel abandoning 14A is less likely, with Intel the only US-based company investing in leading-edge digital semiconductor manufacturing. TSMC's (TSM [https://seekingalpha.com/symbol/TSM]) Arizona fabs are progressing well, but we think the US's preferred outcome is to have a viable US-domiciled alternative."

T.D. Cowen rates the stock a Hold with a $20 price target.

Meanwhile, Morgan Stanley was intrigued by the warrant aspect of the deal. The government will receive a five-year warrant, at $20 per share, for an additional 5% of Intel common shares, exercisable only if Intel ceases to own at least 51% of the foundry business.

"The warrants - granted to the government in the event that Intel divests majority interest in foundry - is an interesting angle, suggesting that there is some possibility of selling the majority interest in foundry to someone else," said Morgan Stanley analysts, led by Joseph Moore, in an investor note. "We don't see a clear buyer, but that flexibility is at least a positive"

"We kind of like the direction this story is taking, as we are believers in a longer-term turnaround of the Intel products business, but do not see high probability of positive DCF foundry business over time," Moore added.

Morgan Stanley views Intel with an Equal-weight rating.

MORE ON INTEL CORPORATION

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* Intel: Interested Parties Do Not Necessarily Interest Me [https://seekingalpha.com/article/4815738-intel-interested-parties-do-not-necessarily-interest-me]
* Intel slips as it says new US stake ups risks [https://seekingalpha.com/news/4488912-intel-rises-even-as-it-says-new-us-stake-ups-risks]
* AEI’s James Pethokoukis: U.S.’s stake in Intel is ‘creating new problems’ with unintended consequences [https://seekingalpha.com/news/4488929-aei-s-james-pethokoukis-u-s-s-stake-in-intel-is-creating-new-problems-with-unintended]