Intel cut at KeyBanc as analysts question sustainability of deal-driven rally

Investing.com -- KeyBanc analysts downgraded Intel Corp to Reduce from Hold, saying the chipmaker’s 55% rally since August is driven by one-off investment deals rather than lasting improvement in its manufacturing.

Intel’s turnaround still hinges on fixing its foundry operations, which continue to face execution failures and weak customer traction.

“A TSMC technology deal – which we think is the only one that matters – is unlikely despite potential for future investments,” analysts at Keybanc said.

Intel has announced three investment deals in recent months: a $2 billion stake from SoftBank, $11.1 billion from the U.S. government for a 9.9% holding, and a $5 billion investment from NVIDIA for about 4%.

While these helped lift sentiment, KeyBanc said the optimism is overdone as none address the structural issues in Intel’s foundry business.

There are media reports that Intel is seeking investments from Apple and TSMC. It could bring short-term upside but KeyBanc reiterated that only a technology-sharing agreement with TSMC could meaningfully improve its manufacturing capabilities.

Analysts see this as a remote possibility given TSMC’s own massive U.S. investments.

Intel has also struck a deal with NVIDIA, where the companies will focus on connecting NVIDIA and Intel architectures to integrate NVIDIA’s AI and accelerated computing with Intel’s x86 CPU technology.

KeyBanc flagged limited visibility on the NVIDIA partnership, noting that the opportunity is hard to quantify since NVIDIA will continue using Arm-based CPUs in its server platforms through 2029.

The analysts cut their rating to Reduce with a $24 price target, citing weak foundry prospects and lack of clarity around client and server demand.

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