In a bold move that could redefine the semiconductor industry, Broadcom Inc. is reportedly evaluating the acquisition of Intel Corp.’s core x86 business. According to Piper Sandler, such a deal could be “extremely lucrative,” as Broadcom has a strong track record of turning around struggling tech giants.
Broadcom’s Strategic Play
The Wall Street Journal recently reported that Broadcom is closely examining Intel’s chip-design and marketing division, potentially leading to a historic split of the chipmaking giant. Meanwhile, Taiwan Semiconductor Manufacturing Co. (TSMC) has reportedly been considering acquiring Intel’s chip plants, possibly as part of an investor consortium.
Piper Sandler analyst Harsh Kumar estimates the potential sale price of Intel’s x86 business at $101 billion. He suggests that Broadcom could fully finance the deal through debt, with a debt-to-EBITDA ratio of 3.47x—an attractive figure in the semiconductor world. If successfully executed, the acquisition could boost Broadcom’s earnings per share by approximately $1.50 to $1.60.
Intel’s Client Market on the Chopping Block?
One of the most significant implications of this potential acquisition is Broadcom’s likely strategy of “pruning” Intel’s client business, which focuses on personal-computer chips. Kumar predicts that Broadcom would strategically exit certain market segments, potentially reducing the segment’s revenue by 25%.
Moreover, Broadcom is expected to shut down Intel’s artificial intelligence (AI) chip business, including the Gaudi chip division. Intel has already canceled its next-generation AI chip, Falcon Shores, further signaling a retreat from this space.
AMD Cross-Licensing and Potential Hurdles
A crucial factor in the deal’s feasibility is Intel’s longstanding cross-licensing agreement with Advanced Micro Devices Inc. (AMD). The agreement, which has been in place since 2009, would terminate if there were a change in control at either company. Whether Broadcom would need to renegotiate this agreement remains unclear. Kumar did not provide specific details on this potential challenge.
Broadcom’s Acquisition Playbook
Broadcom has a well-established history of acquiring and restructuring struggling tech companies. Over the past decade, the company has evolved into a tech juggernaut through a series of high-profile acquisitions. In fiscal 2024, Broadcom reported total revenue of $51.6 billion, a dramatic increase from $6.8 billion in fiscal 2015.
This aggressive growth strategy began with Avago Technologies’ $37 billion acquisition of Broadcom Communications in 2015. Since then, Broadcom has successfully acquired software giants such as VMware, CA Technologies (formerly Computer Associates), and Symantec.
Intel’s Stock Surge and Government Involvement
Intel’s stock has been on a strong rally since February 11, following comments from U.S. Vice President J.D. Vance about potential policy moves to bolster the domestic semiconductor industry. Around the same time, reports emerged that the U.S. government was exploring deals to restructure Intel’s manufacturing operations, including a potential role for TSMC.
Despite these developments, Kumar believes Broadcom has no interest in Intel’s manufacturing operations, which have already been separated from its chip-design business. Instead, Broadcom would likely sell off Intel’s networking and edge business, as it does not align with its strategic priorities.
Market Reaction and Future Outlook
Following these reports, Intel’s stock dipped nearly 2% in morning trading, while Broadcom’s stock saw a minor decline. However, with Broadcom’s proven ability to maximize value from acquisitions, industry experts are closely watching how this potential deal unfolds.
If Broadcom moves forward with acquiring Intel’s x86 business, it could reshape the semiconductor landscape, affecting competitors, supply chains, and industry alliances. Whether this blockbuster deal materializes remains to be seen, but the possibility alone is enough to keep Wall Street and tech investors on high alert.
