Breakingviews - SoftBank throws Intel its next-best lifeline
As part of the deal, opens new tab, Intel will issue new shares at a small discount to the stock's last close, giving Masayoshi Son's group an equity stake of just under 2%. The cash injection pales next to the $16.5 billion of capital expenditures Intel is forecast to make this year, per Visible Alpha, but at the very least, it should help bolster confidence. As recently as last month, Tan warned that Intel may be forced to exit the contract manufacturing business, where it has fallen behind Taiwan Semiconductor Manufacturing (2330.TW), opens new tab and Samsung Electronics (005930.KS), opens new tab, if it does not find a significant customer for its next-generation 14A manufacturing process.
If that was a cry for help, the message has been well received. In addition to SoftBank, Intel may soon welcome another major shareholder: the Trump administration is in discussions to take a 10% stake in the company, Bloomberg reported, opens new tab on Monday, citing sources familiar with the plan, in a move that potentially speeds up the near-$11 billion in government grants promised to Intel as part of the 2022 CHIPS and Science Act.
Having both Trump, who appears to have backed off his calls for Tan's resignation, and Son onboard could help the Intel boss. The White House might be able to exert pressure to help the executive mend a rift with his board about whether to spin out its manufacturing unit, as reported, opens new tab by the Wall Street Journal. And Son's bets in artificial intelligence, including the $500 billion Stargate Project, an AI infrastructure joint venture with OpenAI, might turn into a lucrative opportunity for Intel down the line.
The problem is, what Intel really needs is to revive sales now. That's unlikely to happen: SoftBank will neither seek a board seat nor commit to buying Intel's chips, according to Reuters, citing a source. Realistically, only a strategic investor committed to Intel's long-term technological progress can reverse its decline. That would require, say, an Nvidia (NVDA.O), opens new tab or AMD (AMD.O), opens new tab deciding they need to support alternative high-end chip manufacturers to TSMC. Until then, Tan will have to make do.
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