Intel Stock Rises Again Amid Apple Speculation. Why It’s Still on the ‘Wrong Path.’

Automated handlers for completed packaging make selections for test validation at an Intel fab in Chandler, Arizona (Intel Corporation)

Key Points

About This Summary

• Intel’s stock rose 1.4% to $31.67, adding to a 56% gain this year, driven by speculation of investment from companies like Apple.
• Seaport Research upgraded Intel to Neutral from Sell, suggesting the company should sell or close its chip-manufacturing operations.
• Intel secured a $5 billion investment from Nvidia, but Nvidia did not commit to using Intel’s manufacturing facilities over TSMC’s.

Intel was rising early Thursday as the market bet investment from the likes of Apple could boost the chip company.

There are still reasons to be cautious, Seaport Research Partners said despite upgrading the stock.

Intel shares were up 1.4% at $31.67 in early trading. That was set to add to a 56% gain this year so far through to Wednesday’s close.

The latest boost came after Intel was reported to be seeking an investment from Apple, according to a Bloomberg report on Wednesday. While Intel declined to comment and Apple didn’t respond to a request for comment, shareholders seem to be optimistic about the chances of external backing.

Seaport Research analyst Jay Goldberg doesn’t share the positivity. He upgraded Intel’s stock to Neutral from Sell in a research report but said the company’s easiest option continues to be to either sell or shut down its chip-manufacturing operations rather than try and take on industry leader Taiwan Semiconductor Manufacturing .

“We think Intel is on the wrong path with a shrinking window to save their fabs [fabrication facilities]. That being said, in the near term, the stock is likely to be driven by follow-on investments and the potential for a stop-gap solution for the fabs,” wrote Goldberg.

Intel has already secured a $5 billion investment from Nvidia , with the two chip companies forming a partnership around PC and data center chips. However, Nvidia didn’t commit to using Intel’s chip-manufacturing facilities over those of Taiwan Semiconductor.

Intel could also seek backing from Apple, Amazon.com, Microsoft and Google-parent Alphabet, according to Seaport’s Goldberg. But he noted that Intel continues to have no real artificial-intelligence strategy, as well as problems with its gross margins and potential cash flow constraints.

“Those should become more apparent with time, but for the moment, those concerns will likely be overridden by new outside strategic investors,” Goldberg wrote.

Write to Adam Clark at adam.clark@barrons.com