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Intel's blockbuster announcement of a partnership with Amazon yesterday that set its shares soaring by 8% in aftermarket has left Wall Street unimpressed as major investment banks believe any new benefits from the deal are well out in the future. Intel announced a multi billion dollar partnership with Amazon yesterday without delving into the specifics, and JPMorgan, Bank of America and Evercore all note that while the firm's latest decision to spin out Intel Foundry Services as a subsidiary is good for transparency, any revenue from its advanced 18A manufacturing process is well out in the future.
JPMorgan, Evercore & BofA Maintain Underperform, Underweight & In Line Rating For Intel Stock
BofA, with an Underperform rating and $21 price target for Intel's shares, believes that the firm's "AI fabric win on 18A likely won’t be significant until 2026, and it will face strong competition from Broadcom (AVGO) and others." Intel aims to enter production with 18A in 2025, and Wall Street banks and analysts believe that revenue from this process should materialize in the year after.
BofA adds that Intel's $3 billion win from the US government and its Amazon deal "raised more questions than answers" and the "creation of Intel Foundry as an independent subsidiary and pauses in certain investments in Poland and Germany also lack clarity." With no new financial model provided, the bank is unimpressed by the decision to make Foundry a subsidiary as it doubts that the "move is anything beyond a reporting change."
Potential updates from Intel on the 18A process might change BofA's mind as it also bemoans the manufacturing technology's absence in the latest announcements.
JPMorgan concurs with BofA as far as being unimpressed by the AWS deal is concerned. With an Underweight rating on the stock and a share price target of $26, it views "Intel’s recent announcements as providing better clarification on previously disclosed actions rather than representing incremental changes." However, the bank does believe that the future of the foundry division might be brighter as Intel's order pipeline for the business is growing.
JPMorgan expects a "meaningful revenue ramp from external foundry customers by 2027," and as the AWS deal only shows the growing confidence among semiconductor designers for Intel's foundry business, the bank finds it insufficient to change its metrics for an increase in Intel's share price target.
Evercore also views Intel's Amazon deal and other announcements "as incremental positives." It is, however positive about the foundry subsidiary, noting that the decision is a positive step towards increased transparency and accountability in its manufacturing business." The firm adds that it will stay on the sidelines and stick with its share price target of $25 until "there is greater visibility into the success of its [INTEL] foundry business." The firm has an In-Line rating for Intel's shares.
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