Shares of Intel (NASDAQ: INTC) are tumbling on Thursday. The chipmaker's stock lost 10.8% as of 1:40 p.m. ET despite a brief bump earlier on positive news. The decline comes as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) saw deep red.
A potentially transformative deal with TSMC was overshadowed by China's retaliation to Trump's tariffs.
TSMC could help Intel where it needs it most
Intel and Taiwan Semiconductor Manufacturing (TSMC) -- the world's premier chip manufacturer -- have reportedly reached a tentative agreement that could revitalize Intel's struggling foundry business. Under the deal, TSMC would take a 20% stake in a new organization that would operate Intel's semiconductor manufacturing facilities, with Intel and other U.S. semiconductor firms controlling the remainder.
Intel's foundry business has been a source of pain for the struggling chipmaker. The deal would be a remarkable collaboration between what are otherwise competitors and could help revitalize Intel. TSMC would provide both its technical expertise and help transform Intel's management culture, which has garnered a reputation for sluggishness in recent years.
Tariffs trump the news
Despite the potentially transformative deal, the escalating trade war sent Intel's stock lower. In response to Trump's new tariffs, China announced a 34% levy on U.S. goods. Intel does a significant portion of its business in China, and the new tariffs represent a material threat to its business. The tariffs will make Intel's ability to sell in China at a competitive price difficult, and it could find itself ceding market share to Chinese chipmakers.
Intel is an interesting long-term play, but the current uncertainty around trade means I would hold off for the time being until more clarity emerges.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.
