Intel's stock could register biggest two-day gain in 22 years on upbeat foundry moves

By Emily Bary

Intel has made an expensive bet on manufacturing that's been a source of investor concern. But the company announced a series of positive developments Monday.

Fresh off a strong day of outperformance, Intel Corp.'s stock looks set to head higher still.

Shares have risen 7.8% in Monday's extended session following the company's announcement that it will turn its foundry business into an independent subsidiary. Intel (INTC) also said that it's deepening its work with Amazon.com Inc.'s (AMZN) Amazon Web Services on custom chip designs.

The planned structural change to Intel's foundry business "provides our external foundry customers and suppliers with clearer separation and independence from the rest of Intel," Chief Executive Pat Gelsinger said in a Monday memo.

Further, it will allow that loss-making business "flexibility to evaluate independent sources of funding," while the company's profitable design business can pursue a capital structure more tailored to its own dynamics.

Gelsinger said the expanded arrangement with Amazon is "a multiyear, multibillion-dollar framework covering product and wafers from Intel."

Intel has been struggling lately to gain credibility for its foundry arm and to boost its cash position as it deals with disappointing business trends. While artificial intelligence has catalyzed many high-profile semiconductor stocks, Intel has admitted that it hasn't benefited from the trend as much as anticipated. The company recently announced it was suspending its dividend and embarking on a sizable layoff plan.

With the foundry business, Intel has embarked on an expensive move under Gelsinger to regain leadership in manufacturing and make chips for other companies. Wall Street has been skeptical about Intel's ability to succeed given the cost of the bet and the company's recent technological challenges.

Shares of Intel are indicating at $22.60 in the extended session. Were the after-hours rally to carry through to Tuesday's regular session, it would contribute to a 15% two-day gain relative to Friday's close. That would be the best two-day percentage lift since Intel shares rose 24.8% in the period that ended July 5, 2002, according to Dow Jones Market Data.

The after-hours gains build on momentum for Intel shares seen during Monday's regular session, which bucked weakness in the semiconductor sector.

That hasn't often been the case recently, as Intel's stock has struggled this year. It's down 58% so far in 2024, ranking as one of the worst performers in the S&P 500 SPX over that span, while the PHLX Semiconductor Index SOX is ahead 18%.

But Intel shares rose 6.4% in Monday action, while the PHLX Semiconductor Index lost 1.4%. That made for a notable divergence: The last time Intel shares gained at least 5% while the PHLX Semiconductor Index lost 1% or more was Jan. 24, 2020, according to Dow Jones Market Data. Intel's stock rose 8.1% that day, while the chip index shed 1.1%.

Intel shares outperformed the PHLX Semiconductor Index in Monday's regular trading session by 7.8 percentage points, the widest margin since the spread of 8.1 seen on Oct. 27, 2023.

Opinion: Intel's big turnaround plan is now looking very expensive and poorly timed

Intel's stock was one of only four daily gainers in the PHLX Semiconductor Index.

Monday's regular-session move also related to upbeat foundry news. The company confirmed before the close that it had been granted up to $3 billion in Chips Act funding to "expand the trusted manufacturing of leading-edge semiconductors for the U.S. government."

Specifically, this award covers defense work.

Bloomberg News reported after the close on Friday that Intel had notched a deal to make semiconductors for the U.S. military.

From the archives (August 2022): Biden signs into law $280 billion package for chips, scientific research - here's what's in it

This deal is separate from the roughly $20 billion in funding that Intel announced earlier this year that it was eligible for through the Chips Act.

"Today's announcement reflects the continued progress of Intel Foundry, which brings together all the components customers need to design and manufacture chips at the leading edge," Intel said in Monday's release.

Read on: Intel's stock hasn't been this cheap in at least 30 years. But is it a buy?

-Emily Bary

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09-16-24 1705ET

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