Intel (INTC) shares have seen a surge, even as allegations of stolen technology from Taiwan Semiconductor (TSMC) swirl. This comes amidst a criminal investigation launched by Taiwanese authorities into Wei-Jen Lo, a former TSMC executive now working for Intel. Is this surge justified?
The Allegations and Investigation
The investigation centers around claims that Lo may have taken sensitive semiconductor technology with him when he left TSMC. Taiwanese officials have searched Lo's home and seized computers as part of the investigation. A court order has also frozen some of his assets. TSMC has initiated legal action, accusing Lo of violating non-compete agreements and trade secret regulations.
Intel's Response
Intel CEO Lip-Bu Tan has dismissed the allegations as speculation, reaffirming Intel's dedication to respecting intellectual property rights. Intel maintains that there is no merit to the claims against Mr. Lo.
Factors Driving the Stock Increase
Several factors may be contributing to Intel's stock jump:
- Analyst Optimism: Analyst Ming-Chi Kuo suggests Apple is nearing a decision to select Intel as a foundry partner. This has sparked optimism about Intel's 18A process and potential future chip orders.
- AI Chip Push: Investors are reacting positively to Intel's aggressive move into the artificial intelligence (AI) accelerator chip market.
- Government Support: The recent $11.1 billion U.S. government stake in Intel is viewed favorably.
Valuation and Future Prospects
Despite the positive sentiment, Intel's current free cash flow is negative. However, analysts predict an improvement, with positive cash flow expected by 2027. The question remains whether Intel's AI chip strategy can justify its impressive year-to-date surge.
The Bottom Line
While the allegations against a former TSMC employee now working for Intel are serious, the market appears to be focusing on Intel's potential growth areas, particularly in AI and foundry services. Whether this optimism is warranted remains to be seen.