Intel leaves Wall Street unimpressed by Amazon deal

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Intel's spectacular announcement of a partnership with Amazon yesterday, which sent the company's stock price soaring 8% in the aftermarket, has left Wall Street unimpressed, with major investment banks assuming that any new benefits from the deal are only a distant future. Intel announced a multibillion-dollar partnership with Amazon yesterday without going into details, and JPMorgan, Bank of America and Evercore all point out that while the company's recent decision to spin off Intel Foundry Services as a subsidiary is good for transparency, any revenue from the advanced 18A manufacturing process is still a distant future.

JPMorgan, Evercore and BofA maintain their “underperform”, “underweight” and “inline” ratings for Intel shares

BofA, which rates Intel shares with an underperform rating and a price target of $21, believes the company “The AI ​​Fabric win on 18A will likely not be significant until 2026 and will face strong competition from Broadcom (AVGO) and others.” Intel intends to begin production of 18A in 2025, and Wall Street banks and analysts expect revenues from this process to materialize the following year.

BofA adds that Intel's $3 billion win from the US government and its Amazon deal “have raised more questions than answers” and the “The establishment of Intel Foundry as an independent subsidiary and the suspension of certain investments in Poland and Germany are also unclear..” Since no new financial model has been presented, the bank is not impressed by the decision to make Foundry a subsidiary, as it doubts that the ““move” is anything that goes beyond a change in reporting.”

Possible updates from Intel on the 18A process could cause BofA to rethink its position, as it too has complained about the lack of manufacturing technology in recent announcements.

JPMorgan agrees with BofA that it is not impressed with the AWS deal. With an underweight rating for the stock and a price target of $26, it sees “Intel's recent announcements provide a better explanation of previously announced actions and do not represent incremental changes..” However, the bank believes the future of the foundry division could look brighter as Intel's backlog for this business unit grows.

JPMorgan expects a “Significant increase in sales through external foundry customers by 2027“And since the AWS deal merely demonstrates semiconductor designers' growing confidence in Intel's foundry business, the bank considers a change in its metrics to be insufficient to increase the price target for Intel's stock.

Evercore also looks at Intel's Amazon deal and other announcements “as incremental positive.” However, the foundry subsidiary is positive, as the decision is a positive step towards greater transparency and accountability in the manufacturing business.” The company adds that it will hold back and maintain its price target of $25 until “THere is a better overview of the success of the [INTEL] foundry Business.” The firm has an in-line rating on Intel shares.