Intel Plans IPO for Its Programmable Chip Unit, the Stock Makes Gains
Key takeaways
- Intel is spinning off its specialized chip-making company, PSG
- The divestiture will help Intel compete with Nvidia
- Intel’s share price rose 2.3% in after-hours trading at the news
Wait, wasn’t Intel already public? Yes, but that doesn’t stop the semiconductor chip maker from spinning off its companies and making them public, too. That’s exactly what Intel has planned for its chip business, the Programmable Solutions Group (PSG), at least.
It’s not the first time Intel has made a move like this recently, which suggests the chip maker is looking long-term to compete with Nvidia for market share in the AI boom. Let’s get into the details of what Intel has planned and the stock market reaction.
What’s happening with Intel?
Intel first acquired its programmable chip unit with its 2015 acquisition of Altera, which was a leader in the field. Intel said the restructuring would allow PSG to improve its growth and compete in the market better.
PSG will be a fully standalone company by January 1, 2024. Intel executive Sandra Rivera is set to become CEO of the newly established company, while Intel will report PSG’s financials separately from the first quarter of 2024.
In other good news, Intel also intends to give the PSG its own market debut in the next two to three years. It may also consider divesting a minority stake in the business to interested private investors.
“Our intention to establish PSG as a stand-alone business and pursue an IPO is another example of how we are consistently unlocking more value for our stakeholders,” Intel CEO Pat Gelsinger said in a press release.
It’s not the first time Intel has made this move — last year, the successful chip maker took Mobileye Global public. The company produces chips and software for autonomous vehicles.
What happened with Intel’s stock?
Investors were clearly impressed with the IPO plans, with Intel’s share price lifting 2.3% to hit $36.52 after the news broke. The company has gained 34% in value on the Nasdaq since the start of the year, thanks to the AI boom that has benefited many tech and chip-making companies.
The spin-off gives Intel the opportunity to compete with its rival Nvidia in the long term, which has enjoyed incredible growth since the AI revolution began nearly a year ago. PSG is considered worth around $16 billion, which hasn’t grown in value since Intel bought it in 2015, but the spin-off gives Intel more time to boost the company’s valuation.
Some analysts think PSG could be worth $19 billion to $23 billion in the region, assuming annual revenue climbs up to $2.5 billion. The defense and telecoms industries, which benefit from the types of chips PSG specializes in producing, are ripe for the picking. Any extra profit at the time of the IPO could be fed back into Intel’s AI capabilities.
The bottom line
There’s no real telling how PSG’s spin-off will turn out, but Intel — and Wall Street — certainly have high hopes for its success. The fact is Intel needs all the help it can get to compete with chip-making behemoth Nvidia.
