Intel Corp. shares plunged 26% to their worst daily decline in decades, wiping out more than $30 billion of the company’s market capitalization.
The tech company is undergoing a $10 billion cost-cutting campaign, including suspending its dividend, making sweeping layoffs and slashing capital spending.
Those issues seem to be enough to cause deep anxiety for investors. But Intel’s stock decline could have been worse, but fortunately there is a major factor working in the company’s favor. Investors see the company as ultimately safe, despite the challenges, thanks to Intel’s position as a domestic chipmaker, at a time when the government is willing to help local players in the chip market.
“If the situation were worse, we would have been having conversations with clients by now,” Bernstein’s Stacy Rasgon wrote in a note to clients.
“To survive, subsidies and partner contributions, plus spending cuts and dividend suspensions, will inject $40 billion into the company’s balance sheet through the end of 2025. This suggests that Intel will survive (in some form) to continue this fight.”
Intel reached a deal with the U.S. government earlier this year that provides the company with $8.5 billion in direct funding and $11 billion in loans through the Chips Act, a government program aimed at strengthening the U.S.’s position in chip manufacturing. (ps/jm)
