Intel Downgraded by HSBC on Concerns Over Deal-Driven Rally

Intel Corp (INTC, Financials) was downgraded by HSBC to Reduce from Hold after analysts said the chipmaker's recent share rally is based on short-term investment deals rather than improvement in its core manufacturing business.

The analysts noted Intel's stock has risen 55% since August, supported by three investment announcements: a $2 billion stake from SoftBank, $11.1 billion from the U.S. government for a 9.9% holding, and a $5 billion investment from NVIDIA for roughly 4%.

HSBC said none of these deals address Intel's operational problems, citing ongoing execution issues in its foundry division and limited customer traction. The firm added that a meaningful turnaround would require a technology-sharing partnership with Taiwan Semiconductor Manufacturing Co., which it views as unlikely given TSMC's own U.S. expansion plans.

Intel and NVIDIA recently agreed to collaborate on integrating Intel's x86 CPUs with NVIDIA's AI and accelerated computing architecture. HSBC said the scope of that partnership remains unclear, noting NVIDIA will continue using Arm-based CPUs in its server platforms through 2029.

The analysts set a $24 price target, warning of limited visibility in client and server chip demand. They said optimism around Intel's investment-driven rally may not be sustainable without evidence of lasting foundry improvements.

Investors will look to Intel's next earnings report for signs of progress in its manufacturing turnaround and partnerships.