Could Intel and TSMC Ever Be Partners?

Intel (INTC 3.48%) saw a significant increase in its stock price on Wednesday, following intriguing comments from investment banker R.W. Baird.

Baird analyst Tristan Gerra discussed rumors emerging from the Asian supply chain regarding a potential partnership between Intel and its major competitor in the semiconductor space, Taiwan Semiconductor Manufacturing Company (TSMC -2.12%). Although specific details are limited, investor sentiment appears to be favorable towards the possibility of these two companies collaborating, leading to a 3% uptick in Intel's stock price by 11:15 a.m. ET.

Understanding the Intel and TSMC Situation

Currently, these rumors should be taken with caution and not be overly relied upon for financial decisions. However, according to Baird, there are talks about Intel potentially spinning off its semiconductor fabrication business to create a joint venture with TSMC. In this proposed arrangement, TSMC would share some of its semiconductor engineers and expertise to help advance manufacturing processes in the U.S., focusing on producing cutting-edge 3-nanometer and even 2-nanometer chips. This joint venture would have the capability to manufacture chips for Intel, TSMC, and other fabless semiconductor companies.

Additionally, the venture could benefit from financial support under the CHIPS Act, as reported by TheFly.com.

Should You Consider Intel Stock?

Despite the optimistic outlook from the rumors, Gerra maintains a neutral position on Intel’s stock until more concrete information is available. This cautious approach is prudent given Intel's current financial struggles; the company reported $18.8 billion in net losses over the previous year and is not projected to return to general accounting principles (GAAP) profitability until at least 2026. Furthermore, analysts anticipate a modest earnings of $0.29 per share at that time, resulting in a high price-to-earnings ratio of 74 based on next year’s expectations.

While Intel stock may one day warrant a “buy” recommendation, now is not the right time to make that call.

Rich Smith has no investment in the stocks mentioned. The Motley Fool has recommended Intel and Taiwan Semiconductor Manufacturing. It has a disclosure policy associated with its investments.

Intel, TSMC, partnership