President Donald Trump's reported proposal for the U.S. government to invest in Intel is a sign that he doesn't want the U.S. to rely solely on Taiwan Semiconductor Manufacturing for domestic production of advanced chips, analysts say. Intel stock rose Friday while TSM stock fell.
Intel stock spiked late Thursday on news reports that Trump was considering whether the U.S. should take a financial stake in the beleaguered chipmaker.
On Friday, Bloomberg reported that the Trump administration might use U.S. CHIPS and Science Act funds to buy a stake in Intel to help the company restart its stalled domestic foundry business.
In a client note, Mizuho Securities trading-desk analyst Jordan Klein said the reports suggest that Trump wants U.S.-based fabless chip companies to use Intel fabs.
"This smells of Trump wanting to force Nvidia, AMD, Qualcomm, Apple (and) Broadcom to shift leading-edge foundry orders from TSM to Intel," Klein said. "But (the) key challenge is Intel lags TSM in their most advanced leading-edge node road map."
Taiwan Semiconductor, also known as TSMC, is expanding its semiconductor factories in Arizona, but Trump likely has his hopes set on getting Intel's delayed Ohio chip plant in operation, Klein said.
"We all know Trump wants to shift U.S. chip spending from TSM to Intel as quickly as possible," Klein said. "What makes most sense is Trump gets Broadcom or Qualcomm to acquire (the) Intel Product biz, then (the) fab/manufacturing business becomes a stand-alone that (the) U.S. government can fund with a big investment as it will need lots of money and help."
Intel needs "a white knight" to spearhead its foundry initiatives, CFRA Research analyst Angelo Zino said in a client note. He rates Intel stock as hold, or neutral.
Intel Stock Rises On News
"The greater government participation, aimed at significantly boosting U.S. chip manufacturing, could seek to push and/or encourage U.S. fabless chipmakers to leverage Intel's U.S. facilities," Zino said.
Intel needs customer commitments to support its advanced chip fab effort, Bernstein analyst Stacy Rasgon said in a client note. Intel Chief Executive Lip-Bu Tan has threatened to cancel its advanced fab if the company doesn't secure business for it.
"One could imagine the U.S. government attempting to help with this, either directly through force (or at least heavy encouragement), or indirectly through tariff policy or other regulation (perhaps this could be how Lip-Bu gets the 'hero customer' he needs to continue 14A development)," Rasgon said.
Still, Intel will need more than funding to pull off its cutting-edge fab. It needs technical capabilities, something TSMC has in spades, he said. Rasgon rates Intel as market perform, or neutral.
On the stock market today, Intel stock rose 2.9% to close at 24.56. Taiwan Semiconductor stock slid 0.9% to 238.88.
The Trump administration wants to boost U.S. semiconductor manufacturing and sees Intel "as the domestic company best positioned to challenge TSMC," Wedbush Securities analyst Matt Bryson said in a client note. Bryson rates Intel stock as neutral and TSM stock as outperform.
Chips Stocks Fall On Tariff Talk
In other news, Trump said he would set tariffs on chips in the next two weeks. Last week, Trump said he planned a 100% tariff on semiconductors, while exempting products from companies that are moving manufacturing to the U.S.
However, Trump on Friday told reporters that tariffs on certain items could climb as high as 300%. That sent shares of Nvidia, AMD and others lower.
On Friday, the Philadelphia semiconductor index, known as SOX, dropped 2.3%. The SOX includes the 30 largest semiconductor stocks traded in the U.S.
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