Shares of Intel (INTC 9.34%) were up by 8.4% as of 1:45 p.m. ET Thursday after having gained as much as 10.5% earlier in the session. At the time, the S&P 500 was up by 0.5% and the Nasdaq Composite had gained 0.8%.
What happened
Reports came out Wednesday that the semiconductor giant, which has fallen behind its peers in the age of AI, is in talks with Taiwan Semiconductor Manufacturing for a deal that would help its struggling manufacturing division. In a research note, Baird analyst Tristan Gerra said that, based on “discussions from the Asia supply chain,” it was his understanding that Intel, TSMC, and the U.S. government are discussing plans that would include TSMC sending engineers to Intel’s fabrication plants to improve them, creating a greater degree of parity between the two companies’ manufacturing capabilities.
It is also possible that Intel’s foundry division will be spun off into a new joint venture owned by Intel and TSMC.
Why it matters
While Intel has long been a leader in the chip industry, it has fallen behind severely in the last few years. The ascendance of rival Nvidia amid the AI boom has left Intel in the dust. The company has been trying to upgrade its chip fabrication capabilities to better compete in the crucial AI market, but its efforts have been largely unsuccessful thus far.
TSMC, which manufactures chips in Taiwan for Nvidia and other Intel competitors, is the gold standard in chip manufacturing. A deal with TSMC that enables Intel’s foundries to produce chips on par with those of its rivals could be a game changer for the struggling company.
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