Intel (NASDAQ: INTC) Shares rose 4.1% at 9:45 a.m. ET Monday morning after CNBC reported this morning that the U.S. Department of Commerce is poised to award Intel an $8 billion grant to help it expand its business in the field of semiconductor chips.
The Wall Street Journal had previously (last week) reported that this grant was on its way.
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An oddity in this story is that last week, WJ indicated that Intel was eligible for an $8.5 billion subsidy for factory construction, in addition to a separate $3 billion award for building chip factories focused on producing semiconductors for the US military. CNBC notes that the government appears to have reduced the size of the initial grant by $500 million to $8 billion, “due to uncertainties about Intel’s ability to meet its investment commitments, and because of Intel’s changing technology roadmap and customer demand.”
Either way, Intel could really use the money. The company has already posted $16 billion in losses and $15.1 billion in negative free cash flow over the past twelve months, and sales fell again last quarter.
As CNBC notes, Intel plans to sell assets and lay off up to 15,000 employees to save money.
The $8 billion in government money will help, but it won’t solve Intel’s problems – not by a long shot. It’s true that analysts surveyed by S&P Global Market Intelligence expect Intel to return to generally accepted accounting principles (GAAP) sometime next year. But Wall Street expects Intel to continue burning cash, with negative free cash flow of more than $11 billion over the next three years. Only in 2028 do analysts think that Intel will be healthy again and be able to generate money on its own to keep its business going.
In the meantime, debt will continue to pile up (Intel has $26 billion in debt and that number continues to rise) and stock dilution is a distinct possibility. Subsidies or no subsidies, it’s hard to call Intel stock a buy.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Intel. The Motley Fool recommends the following options: Short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.
Why Intel Stock Popped on Monday was originally published by The Motley Fool
