By Intel (NASDAQ: INTC) has been extending gains in recent sessions after the Trump administration said it has finalised an agreement to take a 10% equity stake in the beleaguered chipmaker.
However, INTC shares need three things to revive: money, customers, and capability – but the US government’s stake addresses only the first, according to a senior Bernstein analyst Stacy Rasgon.
“Intel needs money to build capacity, but they need customers to fill that capacity, and in order for it to get customers, it needs capability,” he told CNBC in a recent interview.
Intel stock is currently up nearly 30% versus the start of this month (August).
US equity stake doesn’t help Intel stock with customers
Speaking with CNBC, Rasgon was rather blunt about the limitations of the federal support.
“There’s not a whole lot the government can do to help them attract customers,” he noted, adding the Pentagon may offer some demand, but Intel’s broader foundry ambitions hinge on commercial clients.
According to him, no amount of government backing can convince businesses to bet their product roadmap on INTC until it proves “it can make the parts that meet specs, are available on time, and have a good cost structure.”
Unlike the deal the Trump administration signed with MP Materials in June, Intel’s arrangements lack guaranteed end customers – and that remains a significant problem for INTC shares, Rasgon noted.
US equity stake doesn’t help INTC shares with capabilities
Capability remains the Achilles’ heel for the semiconductor firm.
According to the senior Bernstein analyst, Intel’s struggle to deliver competitive chips isn’t about funding – it’s about execution.
“Their lack of capability at this point has not really been about dollars,” he said.
INTC foundry lost $13 billion last year, and its advanced process nodes won’t ramp until 2028.
Therefore, splitting the foundry unit would be a disaster – “it goes bankrupt immediately.”
Keeping it within the product company allows Intel to burn money while relying on internal cash flow to survive.
But unless the multinational proves it can manufacture at scale and meet specs, the foundry remains a liability and Intel shares a risk.
Should you load up on Intel shares today?
Intel’s government-backed lifeline offers short-term optimism, but Rasgon recommends caution.
The equity infusion helps bridge the funding gap, but it doesn’t solve the deeper issues of customer trust and manufacturing credibility.
Without execution, he maintains, the funding may not translate into long-term shareholder value.
“If they can’t prove they can execute, who’s going to put any material volume there?”
Investors should also note that other Wall Street firms agree with Bernstein’s cautious view on INTC shares as well.
The consensus rating on Intel stock currently sits at “hold”, with the mean target of roughly $22 indicating potential “downside” of more than 10% from current levels.
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