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Investing.com-- SoftBank Group Corp. (TYO:9984) and Intel (NASDAQ:INTC) announced on Monday that the Japanese tech conglomerate agreed to buy $2 billion worth of stock in the beleaguered chipmaker with the goal of building advanced chipmaking facilities in the United States.
Intel shares jumped nearly 6% in premarket trading Tuesday on the announcement.
Softbank (OTC:SFTBY) will pay $23 per share for Intel common stock, compared to Intel’s Monday close of $23.64. Intel shares surged 4.7% to $24.74 in aftermarket trade.
"This strategic investment reflects our belief that advanced semiconductor manufacturing and supply will further expand in the United States, with Intel playing a critical role," Softbank CEO Masayoshi Son said in a statement.
Intel CEO Lip-Bu Tan welcomed the investment, stating that the deal would build on Softbank’s artificial intelligence ambitions.
The investment comes as Intel grapples with several years of steadily declining sales and shrinking cash balances, as the chipmaker largely fell behind its rivals in capitalizing on the AI boom.
"We think the positive move in INTC post this announcement is justified as we think investors would consider this to reflect a vote of confidence in INTC’s long-term transformation efforts, which includes the company’s focus on improving its balance sheet positioning," Wells Fargo (NYSE:WFC) analyst Aaron Rakers said in a note.
Bloomberg reported earlier on Monday that the Donald Trump administration was in talks to take a 10% stake in Intel by converting some or all of the company’s CHIPS Act grants into equity.
Federal backing, coupled with the Softbank investment, stand to give Intel more headroom to shore up its loss-making foundry business. But investors are doubtful over just how Intel will turn around its finances, as the chipmaker struggles with years of laggard sales.
The company largely fell behind rivals such as NVIDIA Corporation (NASDAQ:NVDA) and Advanced Micro Devices Inc (NASDAQ:AMD) in developing advanced AI chips, while its foundry business was battered by competition from TSMC (NYSE:TSM), whose chipmaking processes largely overtook Intel in recent years.
CEO Tan, who last week had met Trump, has outlined plans to scale back factory construction and establish a more robust product roadmap to turn the company around. But he is seen facing an uphill battle, especially as Intel’s foundry business steadily burns through its cash holdings.
Softbank’s investment in Intel represents another step in the company’s aggressive push into AI and chipmaking, which Son has outlined as a priority in recent years. The Japanese investment house clocked a major windfall from its tech investments in the June quarter, and is in the process of building more AI infrastructure in the U.S. through a $500 billion tieup with OpenAI.
(Ambar Warrick contributed to this article.)