Analyst revisits Intel stock forecast amid surprise plans for a key spinoff

Intel shares powered higher in Wednesday trading, extending a modest gain for the year, after the release of a bullish research report tied to plans for a spinoff of the chipmaker's money-losing foundry business.

Intel (INTC) , which ousted Pat Gelsinger as chief executive late last year amid the group's flagging turnaround, posted a mixed set of December-quarter earnings last month but vowed to focus on new AI-focused products for its data-center division.

The group's broader focus, now being managed by interim co-CEOs David Zinsner and Michelle Johnston, is aimed at scaling its business across the AI spectrum by making chips that power next-generation laptops and those that support processors for client-based servers.

It's also planning to spin off the business that makes chips for other companies, Intel Foundry Services, into a stand-alone unit with an independent board.

The unit in fact reached a lucrative deal last month with Amazon Web Services (AMZN) to make high-end chips. And it plans to pause construction of a $32 billion foundry site in Germany for at least two years.

Intel also inked a $3 billion contract from the Chips and Science Act to develop highly sensitive components for the Department of Defense and plans to sell its a portion of its Altera chip business, which it purchased for $16.7 billion in 2015.

Taiwan Semi to run new Intel foundry?

Baird analyst Tristan Gerra, who reiterated his neutral rating on Intel stock in a note published Wednesday, suggested that "discussions from the Asia supply chain" point to the involvement of Taiwan Semiconductor (TSM) in the foundry-division spinoff.

TSMC would send engineers to Intel's 3nm/2nm fab, applying the company's know-how to ensure that the fab and subsequent manufacturing projects from Intel become viable," Gerra said of the feedback from Asia suppliers.

"The fab could be spun off into a new entity jointly owned by TSMC and Intel, and run by TSMC," he added, noting that it could receive more Chips Act Funding.

https://www.thestreet.com/investing/stocks/analyst-revisits-intel-stock-forecast-amid-surprise-plans-for-a-key-spinoff