Intel's huge rally is helping pay for its AI comeback: Chart of the Day

Intel Corp. plans to raise $15 billion by selling new shares, a move made significantly cheaper by its 165% rally this year, which has reduced the number of shares needed by nearly 80% compared to the price the U.S. government paid last year. The chipmaker, which has seen its stock fall 31% from its June 22 record, will use the funds for factories, equipment, and operations, amid strong demand driven by AI compute investment.

Intel's INTC https://finance.yahoo.com/quote/INTC/ AI ambitions are getting more expensive. Its 165% rally this year is helping foot the bill. The chipmaker said Monday it plans to raise $15 billion by selling new shares https://finance.yahoo.com/markets/stocks/articles/intel-launches-15-billion-share-120506693.html to investors, giving it fresh cash for factories, equipment, day-to-day operations, and other needs. That comes with a cost for existing shareholders. Selling new stock causes dilution https://www.investopedia.com/terms/d/dilution.asp , meaning each share represents a slightly smaller piece of the company. Intel's rally has dramatically reduced that cost. At Monday's close of roughly $98, Intel would need to sell about 153 million shares to raise $15 billion. At the $20.47 per share price the US government paid for its Intel stake last year, raising the same amount would have required roughly 733 million shares. In other words, the same $15 billion now requires nearly 80% fewer shares. The stock's comeback has been remarkable even by the standards of the AI trade. Intel is up about 165% this year, compared with nearly 120% for AMD AMD https://finance.yahoo.com/quote/AMD/ and 17% for Nvidia NVDA https://finance.yahoo.com/quote/NVDA/?utm source=chatgpt.com . And Intel is hardly selling stock at the top. Shares have fallen about 31% from their June 22 record, erasing over $200 billion in market value. Still, the rally has left Intel with something it badly needs — a much easier way to raise money. Intel recently lifted its planned spending on factories, equipment, and other long-term investments this year to about $20 billion. The proposed stock sale alone equals three-quarters of that amount, though Intel has not said all the money will go toward construction or AI. "Customers continue to signal a strong and sustainable demand environment, driven by unprecedented investment in AI compute," Intel said in announcing the offering. Intel sits in a different part of the AI boom than Nvidia and AMD. Along with selling CPUs used in AI systems, Intel is spending heavily on ways to combine increasingly complex chips and on manufacturing chips designed by outside companies. That makes Intel another piece of the AI financing story. Big Tech companies have increasingly borrowed to fund their AI build-outs https://finance.yahoo.com/markets/article/big-tech-is-borrowing-its-way-through-the-ai-boom-chart-of-the-day-100000605.html . Intel is tapping shareholders to help build the factories underneath that boom. Washington adds an unusual wrinkle. The US government bought $8.9 billion of Intel stock last year at $20.47 a share as part of its push to preserve advanced chip manufacturing in the US. SoftBank and Nvidia also invested around that period, near $20 to $23 a share. Those investments were negotiated at fixed prices rather than Intel's market price when the deals were announced.