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BofA has reaffirmed its ‘Neutral’ rating and $25 price target for Intel, indicating that the company’s share price is likely to remain “range-bound until there is clarity around the company’s manufacturing progress, especially 18A process yields and external customer engagement/validation.”
According to BofA, the U.S. government could acquire a 10% stake in Intel by converting the $7.9 billion CHIPS Act grant and an additional $3 billion grant under the Pentagon’s Secure Enclave program into non-voting equity. This aligns with recent comments from U.S. Treasury Secretary Scott Bessent, who noted that such a move would not force companies to buy from Intel.
BofA believes this situation offers a significant opportunity for Intel by promoting its “U.S.-based manufacturing as a way for new and existing fabless customers to expand their made-in-the-U.S. presence.”
SoftBank has similarly concluded that it can benefit by investing $2 billion in Intel, aiming to gain exposure to “semiconductor innovation in the United States.”
However, BofA sees several downsides: a 10% dilution of existing common shareholders without additional benefits, renewed pressure to deliver on critical projects such as Intel’s delayed Ohio fab, and likely increased scrutiny or pushback from Chinese customers, who accounted for approximately 29% of Intel’s total sales in FY24.
This situation is not unique; earlier this week, it was noted that the Trump administration is also considering converting CHIPS Act grants into equity for Micron, Samsung, and TSMC. Given minimal disbursements so far, these companies could also benefit from government support, potentially negating some of the advantages Intel had expected to gain.
In summary, while there are potential benefits, the U.S. government stake poses significant risks that could impact Intel’s stock and operations.
