Wall Street Breakfast: Saving Intel
Deficit distress
We heard you! The “national debt” dominated the suggested themes in last month’s sentiment survey, which explored investing decisions and the hot topic opinions of the broader Seeking Alpha community.
Click here to take the SA Sentiment Survey for September and don’t forget to share your thoughts in the WSB comments section.
Saving Intel
Once considered to be a major force in Silicon Valley, Intel (INTC) in recent times has been marred with technological and financial struggles. It has prompted thousands of layoffs, a suspension of its dividend, and a pause in factory projects amid a costly foundry buildout. Shares of the company have even lost over half of their value in 2024, so it’s no surprise that rivals are looking to scoop up some company assets at cheaper prices.
Word on the Street: Reports have surfaced that Qualcomm (QCOM) has approached Intel about a potential takeover. While a deal is said to be far from certain, a transaction like this could benefit from the billions in government grants and low-cost loans lined up for Intel, but face scrutiny from antitrust regulators. If not the entire company, Qualcomm is also said to have been considering various parts of Intel’s design operations, particularly its client PC design division.
That’s not all. Apollo Global Management (APO) seems to have thrown its hat in the ring as well. According to Bloomberg, Apollo has offered to invest about $5B into Intel, with the latter currently considering the proposal. Broadcom’s (AVGO) name has also come up, with advisors continuing to consider potential bids for the chipmaker to make the most of the current situation.
Good idea? “Antitrust concerns exist but may be manageable, particularly if the foundry business is spun off as planned,” Kumquat Research writes in Intel And Qualcomm: A Solid Merger Match. “Aside from the unrealistic $90B price tag, the merger is likely to encounter significant regulatory, financial, and integration challenge,” counters KM Capital, pointing to discounted cash flow. “I do not want to be boastful, but Intel’s stock has lost more than 30% of its value since I have shared my ‘Strong Sell’ recommendation back in May.” Take the latest SA Sentiment Survey.
Nuclear restart
In a move that can unlock financing for the industry, major global banks, including Bank of America (BAC), Barclays (BCS), Citi (C), Morgan Stanley (MS), and Goldman Sachs (GS) are set to pledge increased support for nuclear energy. While nuclear project funding complexities and risks remain, experts say that a public show of support has been long-awaited, given the critical role nuclear energy can play in the overall global energy transition. Remember, Microsoft just signed a 20-year deal to revive the Three Mile Island nuclear plant to power its data centers.
Connected risks
It’s not only TikTok. The Biden administration today is expected to roll out a ban on Chinese software and hardware used in connected and autonomous vehicles due to national security concerns. “You can imagine the most catastrophic outcome theoretically if you had a couple million cars on the road and the software were disabled,” Commerce Secretary Gina Raimondo said previously, while an auto trade group was quoted as saying that any such changes of equipment would take time. The proposed U.S. ban would come after the White House announced it would put 100% duty on imported Chinese electric vehicles. (74 comments)
Bare-bones
Congressional leaders on Sunday announced a bipartisan short-term spending bill that was described by House Speaker Mike Johnson as “very narrow, bare-bones.” It should pass by the end of the week and would avoid a potential government shutdown when the new budget year starts on Oct. 1. Notably, to reach a consensus on the stop-gap bill, Johnson abandoned a push to mandate proof of citizenship when people register to vote. “As history has taught and current polling affirms, shutting the government down less than 40 days from a fateful election would be an act of political malpractice,” Johnson said in a statement.