Intel Announces $2 Billion Investment by SoftBank. Why It’s Key for the Stock.

Intel CEO Lip-Bu Tan announced an equity investment from Japan’s SoftBank. (Courtesy Intel)

Intel Corp. and Japan’s SoftBank announced a $2 billion investment in the chip maker.

SoftBank will buy Intel shares at $23 each, a slight discount to Intel’s $23.66 closing price on Monday. The move could be seen as a vote of confidence for Intel, which has been playing catch-up in an industry that has chased the artificial intelligence boom.

Apart from the money, the most important aspect of the investment is it could bring a major customer for Intel’s chip-manufacturing operations—SoftBank is the majority owner of chip-design firm Arm Holdings .

Arm does most of its business licensing its designs for handsets, but it is aiming to make its own chips as soon as this year, according to multiple reports.

Intel desperately needs the validation of a major external customer choosing to manufacture semiconductors using either its newest 18A process or its future 14A process.

SoftBank CEO Masayoshi Son said, “This strategic investment reflects our belief that advanced semiconductor manufacturing and supply will further expand in the United States, with Intel playing a critical role.”

The announcement of the SoftBank investment also comes amid reports that Intel was talking to the Trump administration about the government taking a stake in the company of up to 10%. The Wall Street Journal reported Intel could convert some of the billions of dollars it is set to receive from the 2022 Chips and Science Act and convert that to equity.

On the investment from SoftBank, Intel CEO Lip-Bu Tan said, “We are very pleased to deepen our relationship with SoftBank, a company that’s at the forefront of so many areas of emerging technology and innovation and shares our commitment to advancing U.S. technology and manufacturing leadership.”

Tan thanked SoftBank founder Masayoshi Son for “the confidence he has placed in Intel with this investment.”

Shares of Intel rose 6.3% in premarket trading on Tuesday.

Write to Liz Moyer at liz.moyer@barrons.com and Adam Clark at adam.clark@barrons.com