Intel's Raging Stock Rally Lifts the US Government's 10% Stake by 50% to $16B in Weeks

In August, the US government invested $11.1 billion (£8.2 billion) in exchange for a 10% stake in the struggling chipmaker Intel (Nasdaq:INTC). The investment is now worth around $16 billion (£11.8 billion) after Intel's stock price surged by over 54% in the past one month.

The investment triggered the rally, which was further bolstered by Nvidia's (Nasdaq:NVDA) announcement that it would invest $5 billion (£3.7 billion) in Intel and co-develop AI chips for PCs and data centres. The rally continued on a strong footing after Intel shares surged 7% more on Wednesday amid reports claiming that the company is in early discussions with its long-time rival Advanced Micro Devices (Nasdaq:AMD). The talks revolve around Intel's manufacturing unit adding AMD as a foundry customer.

Even the White House celebrated Intel's monumental surge in stock price. US Press Secretary Karoline Leavitt said in a recent celebratory post on the social media platform X: 'GENIUS: Trump's Intel Investment Skyrockets 50% in One Month.'

In August, the Trump administration negotiated an $8.9 billion (£6.6 billion) investment in Intel stock, buying 433.3 million common shares at $20.47 (£15.21) per share. The investment will be funded by the remaining $5.7 billion (£4.2 billion) in grants previously awarded, but yet to be paid, to Intel under the US CHIPS and Science Act and $3.2 billion (£2.3 billion) awarded to the company under the Secure Enclave program. The $8.9 billion investment is in addition to the $2.2 billion (£1.6 billion) in CHIPS grants Intel has received to date.

'As the only semiconductor company that does leading-edge logic R&D and manufacturing in the US, Intel is deeply committed to ensuring the world's most advanced technologies are American-made,' Lip-Bu Tan, CEO of Intel, had stated in August. 'President Trump's focus on US chip manufacturing is driving historic investments in a vital industry that is integral to the country's economic and national security. We are grateful for the confidence the President and the Administration have placed in Intel, and we look forward to working to advance US technology and manufacturing leadership.'

Intel has also been attracting major investors, including a $2 billion (£1.4 billion) private placement with SoftBank. The company's multiple backings have somewhat helped it rebound after shares hit their lowest in over a decade earlier this year. Meanwhile, Intel's fiscal 2024 saw the stock price tank 60% in value, which was followed by former CEO Pat Gelsinger's exit in December.

While the current Intel rally is raising investor hopes of a strong recovery, not every analyst is buying into it. Bernstein maintained its 'market perform' rating on Intel with a 12-month stock price target of $21 (£15.6) per share, implying over a 35% downside from current trading levels.

In a Thursday note to clients, Bernstein described Intel as 'fundamentally challenged', and maintained a cautious stance. The brokerage warned that 'more volatility remains in store for the shares,' while expressing wariness about betting against the stock given the headline risk.

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