Key Points
Shares of Intel (NASDAQ: INTC) spiked on Wednesday after the chipmaker struck a deal to reacquire a key manufacturing site.
Image source: Intel.
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A smart deal for Intel and its partners
Back in 2024, Intel sold a 49% stake in a joint venture formed around its Fab 34 facility in Ireland to investment funds overseen by Apollo Global Management (NYSE: APO) for $11.2 billion. The semiconductor designer used the cash to advance its manufacturing plans.
With Intel now on firmer financial and competitive footing, it agreed to repurchase Apollo’s stake in the venture for $14.2 billion. Intel plans to fund the purchase with its cash reserves and roughly $6.5 billion in new debt. Management expects the deal to add to the company’s earnings per share by 2027.
“Our 2024 agreement was the right structure at the right time and provided Intel with meaningful flexibility, enabling us to accelerate critical initiatives,” chief financial officer David Zinsner said.
Intel is well-placed to benefit from shifting AI trends
Intel makes chips for artificial intelligence (AI)-enabled personal computers and high-performance data center servers at its Fab 34 site. The facility is set to play a central role in the company’s AI-driven growth strategy.
After missing out on the AI model training-fueled graphics processing unit (GPU) craze spearheaded by Nvidia, Intel is now poised to profit from a forthcoming boom in central processing units (CPUs).
As more companies shift from AI model training to inference — the process of using a trained model to make decisions — demand for CPUs is set to surge. That plays right into Intel’s wheelhouse.
Still, competition is likely to be fierce. Nvidia, Advanced Micro Devices, and Arm Holdings are all ramping up their CPU offerings to participate in this lucrative trend.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool has a disclosure policy.