Shares of Intel (INTC 4.50%) are spiking Tuesday, up 7.4% as of 11:38 a.m. ET. The jump comes as the S&P 500 (^GSPC 0.39%) lost 0.3% and the Nasdaq Composite (^IXIC 0.73%) lost 1.1%.
The struggling chipmaker's stock is flying higher after it was revealed that the Japanese conglomerate SoftBank is taking a major stake in Intel.
SoftBank's $2 billion stake sends Intel stock soaring
The companies announced this morning that SoftBank would take a $2 billion equity stake in Intel at a price of $23 per share. This makes SoftBank the fifth-largest shareholder, owning about 2% of the chipmaker.
The investment from SoftBank is a major validation and vote of support for Intel, which has struggled in years past to compete with rivals Nvidia and AMD in the all-important artificial intelligence (AI) chip market. SoftBank is a major backer of all things AI and has significant investments in important players like OpenAI.
Government interest is a wild card for Intel
The investment comes just a week after Intel's CEO, Lip-Bu Tan, met with President Trump after he had called for the CEO's resignation due to Tan's alleged ties to the Chinese government. The administration places a high value on Intel's strategic importance, given it's one of the few American chipmakers with significant domestic manufacturing capabilities.
Image source: Getty Images.
While the SoftBank investment and its implicit vote of confidence are meaningful, Intel still faces significant challenges in its path to relevance in AI. The company's sales have continued to sag, and it's been some time since it turned a profit.
The company has been undergoing a significant transformation that included a drastic reduction in its fabrication capacity, but Tan may reverse course, given pressure from Trump and this investment from SoftBank. While things are rocky, Intel could be a good pick over the long term. Expect some turbulence, however, in the short and medium term.
