What Happened:
Shares of computer processor maker Intel (NASDAQ:INTC) jumped 7% in the afternoon session after the Biden-Harris Administration announced that the company (Intel) has been awarded up to $3 billion in direct funding under the CHIPS and Science Act for the Secure Enclave program. The CHIPS and Science Act is a U.S. government initiative to boost domestic semiconductor production and cut reliance on foreign suppliers.
According to the press release by the Department of Defense, "The funding (Secure Enclave program) will support the manufacturing of microelectronics and ensure access to a domestic supply chain of advanced semiconductors for national security."
Notably, Intel is the only American company that designs and manufactures leading-edge chips. The company further clarified that the award is different from the $8.5 billion funding in partnership with the U.S. Department of Commerce announced earlier in the year (March 20, 2024).
To demonstrate its readiness for the task ahead, the company noted it is on track to produce the 18A fabrication process (its most advanced manufacturing process for cutting-edge chips) in 2025.
The update is good news for investors, especially for Intel fanboys betting on the company's ability to close the gap between competitors, including Taiwan Semiconductor Manufacturing Company, Samsung Electronics, and GlobalFoundries. While some might also argue that it is still early days, regardless, the updates are encouraging as the company continued to endure a challenging year, with the stock down more than 50% year to date.
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What is the market telling us:
Intel’s shares are very volatile and over the last year have had 19 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 17 days ago, when the stock gained 9.5% after Bloomberg reported the company is in talks with investment bankers to explore options, including the split of its product-design and manufacturing businesses. The sources added that the decisions are still in the early stages.
Intel is down 54% since the beginning of the year, and at $22.06 per share it is trading 56.5% below its 52-week high of $50.76 from December 2023. Investors who bought $1,000 worth of Intel’s shares 5 years ago would now be looking at an investment worth $422.41.
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