BofA Maintains Underperform on Intel, $19 Price Target

BofA Securities analyst Vivek Arya reiterated an Underperform rating and $19 price target on Intel (NASDAQ: INTC).

“Media reports suggest the possibility of Intel (INTC) splitting up, with AVGO and TSMC interested in acquiring parts of the design and manufacturing segments.

None of the parties have made any statements.

In our view, any potential INTC split could be time- consuming and complicated given: 1) Extensive approval requirements from global (China) regulators due to INTC’s dominant ~70% share of PC/server CPU, 2) Mismatch between INTC and TSMC’s manufacturing processes, 3) TSMC’s ongoing fab expansion plans in Arizona with ability to serve AI customers, 4) AVGO’s existing low-levered but high debt ($58bn net debt) balance sheet, and 5) Constraints of INTC’s CHIPS Act funding (design needs to own 50%+ of manufacturing) and ROI requirements from co- investment partners Apollo and Brookfield.

We maintain Underperform on INTC based on its organic risks including lack of AI pipeline, high competitive risks against ARM-based rivals and manufacturing gap with TSMC.

If any M&A scenarios were to be considered, read-across could be positive for US fabless customers (improved capability of US- based foundry), mixed for AMD (M&A turmoil initially through potentially tougher competition later) and negative for semicap and EDA (customer consolidation.).”

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