Why Intel Stock Is Gaining Today
Intel (NASDAQ: INTC) stock is jumping in Monday's trading thanks to bullish news for the company's fabrication business. The semiconductor specialist's share price was up 2.3% as of 1:15 p.m. ET. Shares had been up as much as 4.7% earlier in the daily session.
After the market closed last Friday, Bloomberg published a report stating that Intel had qualified to receive $3.5 billion in federal funding for the production of semiconductors for U.S. national defense. In addition to suggesting substantial contract wins, the report is a positive sign for other grants and loans that the company has been poised to receive through the CHIPS and Science Act. But despite the promising grant news and stock gains, there was also a bearish report for Intel's design and fabrication units today.
Intel could still be central to the country's chip strategy
The ability to fabricate advanced chips domestically has become a key economic and national security priority for the U.S. government. Right now, the vast majority of high-performance chips used for artificial intelligence (AI) and other advanced applications are manufactured by Taiwan Semiconductor Manufacturing in Taiwan.
Intel has been at the center of the United States' push to improve domestic fabrication capabilities, but the company's recent financial and technological struggles have created uncertainty surrounding the plan. Bloomberg's report that Intel will likely receive new grants for the fabrication of high-performance chips for military and intelligence is helping to ease investor concerns.
If the company does receive $3.5 billion in funding for chip manufacturing through the Pentagon's Secure Enclave initiative, it would be a significant win for the company's fab business. It could also suggest that the company is likely still on track to receive the full $8.5 billion in direct funding and $11 billion in loans apportioned through the CHIPS Act despite challenges facing the business.
Intel reportedly missed out on a fab deal for Sony's next PlayStation
Reuters published a report this morning stating that Intel had lost a potential deal to design and manufacture chips that will be used in Sony's upcoming PlayStation 6 console. The deal could have generated billions of dollars in revenue for the chipmaker, but Sony reportedly made the decision not to use Intel's services back in 2022 due to pricing concerns. Instead, the design and fabrication contracts were reportedly won by Advanced Micro Devices and TSMC, respectively.
If Reuter's report is correct, missing out on hardware contracts for PlayStation 6 would be a significant loss for Intel -- but it's not surprising that the stock is still climbing today. Governmental support is central to Intel's fabrication business and overall turnaround effort, and bullish indicators on that front are far more significant than missing out on design and fabrication deals for gaming hardware.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
