Intel's Shares Fell on a Friday
In a recent development, Intel's foundry business, which has been on a downward trend for the past two years, received a significant boost with a $5 billion investment from Nvidia. However, the news has brought mixed reactions from investors and analysts.
According to data provided by S&P Global Market Intelligence, Intel's foundry business generated $17.5 billion in revenue last year, but the unit's losses in 2024 are projected to reach approximately $4 billion, a significant concern for Intel's financial health. For every $1 worth of chips Intel makes on contract for a customer, the company loses about $0.46.
Yesterday, Intel's stock skyrocketed due to the Nvidia investment, but this morning, it was down 3.3% after Citigroup downgraded it to "Sell". Citigroup's decision reflects skepticism on Intel's ability to overcome its problems, despite the Nvidia deal. The bank set a $43 price target for Intel, the lowest among investment banks.
While most investors are confident that this event marks a turning point for Intel's stock, Citi is the only bank that has not raised its optimism about Intel. The bank believes that the chances of success for a foundry deal are minimal.
One positive note comes from Benchmark, which set a higher price target for Intel at $56, indicating a more optimistic outlook. At least four investment banks have raised their price targets on Intel since the Nvidia investment news.
Nvidia will help Intel develop AI infrastructure and personal computing products with Nvidia technology. The foundry unit's losses in 2024 are a significant concern, but the partnership aims to address these issues and improve Intel's foundry business, which is currently the company's biggest money loser.
The data shows a decline in Intel's foundry revenue over the past two years, but the investment from Nvidia offers a glimmer of hope for the tech giant. The foundry unit is undoubtedly the biggest problem Nvidia must help solve in its partnership with Intel.
As the situation unfolds, it will be interesting to see how Intel navigates these challenges and whether the Nvidia investment will indeed mark a turning point for the company's foundry business.
