Morningstar says it is maintaining its fair value estimate for no-moat Intel and retaining a Very High Uncertainty Rating. The firm notes that SoftBank will buy Not stated billion of Intel stock at Not stated per share as part of broader investments in US chip manufacturing, and that the US government appears nearer to a deal to use CHIPS and Science Act funds to acquire a 10% stake in Intel. Shares rose 7% on the combined news. Key Morningstar metrics shown in the article list the fair value estimate as Not stated, a Morningstar rating of three stars, no economic moat, and a Very High uncertainty rating.
The research note argues these investments increase the likelihood that Intel’s foundry business will stay on track to invest in advanced chip manufacturing, particularly the 14A node, and to serve external foundry customers as well as the company’s internal product lines. Morningstar reports that Intel foundry was unable to secure significant external customer orders for its upcoming 18A process, and says a government stake might either incentivize or require large US fabless designers to use Intel foundry on 14A. The note also highlights that the SoftBank stake could encourage ARM, another SoftBank holding that reportedly aspires to build its own semiconductors, to use Intel foundry.
Morningstar cautions that, even with outside support, Intel will need to invest heavily to bring 14A production to fruition and that 14A is likely uneconomical without an inflow of external orders. The firm warns government ownership could pressure profitability, forcing pricing concessions on external foundry orders. It also raises the possibility that the US government may seek to tax foundry revenue, drawing a parallel to the proposed 15% tax it seeks on Nvidia’s and AMD’s Artificial Intelligence GPU sales into China once those sales receive export licenses. Overall, Morningstar says these investments bring Intel closer to a bullish scenario but do not change its current uncertainty assessment or stated fair value estimate.
