Intel’s Strategic Reversal Sends Shares Tumbling

A surprising strategic pivot by Intel Corporation has triggered significant volatility in its stock price. Contrary to widespread market expectations, the semiconductor giant has decided to retain its Networking and Edge (NEX) division, abandoning plans for a potential sale or spin-off. This unexpected move led to a sharp sell-off among investors who had anticipated a capital infusion from divesting the unit. On Thursday, Intel's equity plunged 7.74%, making it the worst-performing component in the S&P 500 index for the session.

The company's ability to reverse course stems from a recently improved financial position, which has alleviated immediate pressure to raise capital through asset sales. A key development is Intel's receipt of an $8.9 billion package from the U.S. government, which includes a 10% capital investment. This federal support is complemented by substantial investments from SoftBank, totaling $2 billion, and Nvidia, which committed $5 billion. Bolstered by this financial cushion, CEO Lip-Bu Tan is now positioned to pursue long-term synergies between the NEX business and Intel's core Data Center & AI operations.

Management justifies the decision by emphasizing the growing necessity for deep integration across chip architecture, software, and systems. This cohesive approach is viewed as critical for strengthening Intel's competitive stance in the high-growth arenas of artificial intelligence and edge computing. The NEX division represents a substantial operation, having generated approximately $5.8 billion in revenue during 2024. Furthermore, discussions with Ericsson regarding a potential partial sale of the unit have been formally terminated.

Should investors sell immediately? Or is it worth buying Intel?

Rally Momentum Stalls

The recent decline interrupts a remarkable rally for Intel shares. Since the start of the year, the stock had surged over 100%, fueled largely by speculation surrounding its foundry business. Rumors of a potential deal with Apple to manufacture M-series chips beginning in 2027 had propelled the share price to 52-week highs.

The choice to keep NEX has tempered this upward momentum. Some market participants had banked on proceeds from a sale to reduce corporate debt or to fund share repurchase programs. The current consensus among analysts rates the stock as fairly valued to slightly overvalued, though individual price targets suggest potential upside toward $36 per share. The critical question now is whether the integrated NEX division can deliver the promised competitive advantages in the intensifying race for AI market share.