Intel, the renowned chip maker, is exploring new avenues for financial growth through an initial public offering (IPO) of its programmable-chips division. This move is expected to provide a substantial boost, potentially amounting to billions of dollars, as Intel positions itself to compete with the likes of Nvidia and other industry rivals.
Over the next two-to-three years, Intel (ticker: INTC) plans to conduct an IPO for its Programmable Solutions Group (PSG). This strategic decision not only aims to enhance the unit’s performance but also invites external investment, furnishing Intel with additional resources.
Currently, estimates suggest that the PSG unit holds a value of approximately $16 billion. This valuation is based on a normalized annual revenue of $2 billion, as analyzed by Oppenheimer analyst Rick Schafer. Although he maintains a Perform rating on Intel stock without specifying a target price, the seemingly underwhelming price tag could be attributed to Intel’s acquisition of the business through its $16.7 billion purchase of Altera in 2015. However, by managing PSG as an independent entity starting from next year in anticipation of the planned IPO, Intel may have an opportunity to bolster its overall valuation.
The PSG unit specializes in field-programmable gate array (FGPA) chips. Renowned for their reprogrammability, these chips can be easily tailored to fulfill specific tasks. Consequently, they enjoy widespread popularity across various sectors, including defense and telecommunications.
In summary, Intel’s decision to pursue an IPO for its programmable-chips division signifies a significant step towards potential financial growth. With a focus on improving performance and attracting external investment, this strategic move positions Intel to compete with industry rivals such as Nvidia. The PSG unit’s specialization in versatile and adaptable FGPA chips further underscores its value across diverse sectors.
Intel’s Planned IPO and Strategic Investments
Intel, a leading semiconductor company, is set to launch an Initial Public Offering (IPO) for its FPGA (Field-Programmable Gate Array) business. This move has raised questions about Intel’s future plans and how it intends to utilize the IPO funds.
Ian Cutress, CEO of More Than Moore, an industry analyst specializing in semiconductors, believes that Intel’s decision to go public with their FPGA business indicates significant customer growth predictions for the coming years. Cutress also questions how Intel plans to use the funds generated by the IPO if it takes place in the next 2-3 years.
While Intel intends to retain a majority stake in the PSG (Programmable Solutions Group) unit after the IPO, they are open to exploring private investment options to accelerate its growth.
The need for additional funds is apparent as Intel’s CEO, Pat Gelsinger, is actively pursuing an expensive expansion of the company’s contract chip-making operations. Furthermore, Intel faces competition from Nvidia and Advanced Micro Devices (AMD) in the data center market. To preserve its market share and compete effectively, Intel must also invest in its artificial intelligence chip pipeline.
Interestingly, the spinoff of the FPGA business brings about an executive change. Sandra Rivera, the current general manager of Intel’s key Data Center and AI Group, will transition to head the PSG unit. This shift creates an opportunity for Intel to bring in an external executive with expertise in AI chips to counter Nvidia’s growing presence in the data center market.
These developments have positively impacted Intel’s stock price, which saw a premarket trading increase of 12.1% on Wednesday, reaching $36.45.
Adam Clark