Why Intel Stock Popped on Tuesday
Key Points
Intel is laying off workers in its data center division.
It's also partnering with Fortinet to build a better security chip.
Meanwhile, news from Asia strengthens the bull thesis for semiconductor companies in general.
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Intel (NASDAQ: INTC) stock soared 8.4% through 2:10 p.m. ET Tuesday on a raft of positive news headlines -- or at least headlines investors viewed as positive.
Image source: Intel.
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Layoffs at Intel
Intel employees are probably less thrilled with the first item on this list, a report from Business Insider that Intel will lay off an unspecified number of employees in its data center division. If true, the layoffs would come on top of a 15% reduction in force last year -- 5,000 souls -- with thousands more laid off in 2024.
The good news: Intel hopes all these layoffs will translate into annual savings in excess of $10 billion.
Alliance with Fortinet
Separately, Intel announced today it will collaborate with cybersecurity company Fortinet (NASDAQ: FTNT) to develop a secure "Fortinet Security Processor 6" semiconductor chip that will integrate well with Intel processors.
Few details were revealed, but this sounds like a contract manufacturing agreement that will make use of Intel's foundry business to manufacture chips for its partner.
Good news from TSMC
And speaking of foundries... Intel rival Taiwan Semiconductor Manufacturing Company (NYSE: TSM) just announced plans to raise the price of its own contract manufacturing services by either up to 10% (as Nikkei Asia reports) or up to 20% (as Nikkei goes on to explain) for certain advanced chips it manufactures for customers including Nvidia and AMD.
As a competing foundry business, TSMC's decision to raise prices gives Intel implicit permission to raise its own prices without fear of losing customers -- or else hold its own prices steady and take market share from its rival. More than that, TSMC's decision implies that the market for AI semiconductor chips remains so strong that Intel might be able to do a little bit of both!
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fortinet, Intel, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
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