The past few weeks have been eventful for Intel (INTC, Financial) and its shareholders, with reports suggesting the chipmaker may turn its Foundry business into an independent subsidiary. However, an even bigger development is on the horizon. Last Friday, it was reported that Qualcomm (QCOM, Financial) has approached Intel about a friendly takeover deal, which could become the largest technology deal in history.
Shares of Intel, which had rebounded earlier in the week after announcing a major new Foundry win with Amazon (AMZN, Financial) Web Services, surged following the news, while Qualcomm's stock moved lower. Intel's struggles, particularly in the data center market where it lags behind NVIDIA (NVDA, Financial) and Advanced Micro Devices (AMD, Financial), along with its substantial capital needs for expanding U.S. manufacturing, have made the market cautious. Meanwhile, Qualcomm is dealing with its own challenges as its core handset market remains sluggish.
- An acquisition of Intel would instantly position Qualcomm as a leader in the PC and laptop markets through Intel's x86 chips. This aligns with Qualcomm's strategy to diversify its revenue streams and reduce dependence on the seasonal handset market.
- However, Qualcomm is already making inroads into the notebook PC market with its competing Arm-based (ARM) Snapdragon CPUs. The company is gaining momentum and stands to benefit from emerging AI-powered capabilities, making a complete overhaul of the PC business through an Intel acquisition difficult for some shareholders to accept.
- A merger between Qualcomm and Intel would also bring significant regulatory risks and uncertainties. The FTC is unlikely to easily approve a deal between two of the largest semiconductor firms, especially as the government tightens regulations on tech giants like Alphabet (GOOG, Financial), Apple (AAPL, Financial), and Meta Platforms (META, Financial) due to competitive concerns. These regulatory hurdles could overshadow both stocks for months and distract executives from their core operations.
- Qualcomm isn't the only entity interested in Intel. Recently, it was reported that Apollo Global Management (APO, Financial) has offered to invest up to $5 billion into Intel in exchange for equity. This capital infusion is a positive sign for Intel, as it represents confidence in the company's future and could support its manufacturing expansion efforts.
The main takeaway is that a blockbuster deal between Qualcomm and Intel seems improbable due to strategic and regulatory challenges. However, the interest from Qualcomm and Apollo Global Management is a positive development for Intel.
