Intel’s Stock Drops Pre-Market as TSMC JV Excitement Short Lived

The announcement of a JV between Intel and TSMC had a marked impact on the stock market yesterday, only for the rally to be swept up in the bearish sentiment that surrounds tariffs. Intel's stock (NASDAQ: INTC) added 9.7% from $20.94 following the news, only to give much of that back during this morning's pre-market.

Intel trades down 4.46% this morning, bringing the price back to $21.43. On the other hand, TSM's stock experienced a decline of 7.6%, largely attributed to former U.S. President Donald Trump's announcement of imposing 32% tariffs on Taiwan.

The two firms are leaders in the semiconductor industry, and the tentative agreement for a joint venture aimed at enhancing chip production capabilities in the United States marks a significant step in the U.S. government's ongoing efforts to establish the country as a formidable leader in the global semiconductor manufacturing space.

The joint venture will see Taiwan Semiconductor Manufacturing (TSM) taking a 20% stake, contributing its renowned chipmaking expertise instead of direct financial investment. This strategic move is expected to bolster Intel's existing manufacturing processes by leveraging TSM's advanced technological capabilities.

This collaboration comes amid Intel's efforts to revitalise its foundry business, which reported an annual loss of $18.8 billion for Fiscal Year 2024. The foundry division is not projected to reach breakeven until 2027. However, Intel's partnerships with technology giants like Microsoft and Amazon suggest a growing demand for its manufacturing capabilities, as these companies aim to develop their own custom chips utilising Intel's foundries.

Intel's CEO, Lip-Bu Tan, emphasised the strategic importance of strengthening the company's foundry business to compete globally. Despite the positive market reaction to the joint venture announcement, Intel's stock maintains a Hold consensus rating with an average price target of $23.19, suggesting a modest 3.4% upside potential. Over the past year, Intel's stock has faced a significant downturn, declining nearly 43%.

This joint venture is poised to strengthen Intel's position within the semiconductor industry while fostering technological advancements in U.S. chip production. As the collaboration progresses, both Intel and TSM are expected to navigate the challenges and opportunities presented by this strategic partnership.