Why Intel Stock Sank Today

Intel (INTC -3.33%) stock slipped again Wednesday. The chip company’s share price closed out the daily trading session down 3.3%.

Bloomberg published a report today indicating that there are now doubts as to whether Intel will receive the roughly $19.5 billion in financing it had been expected to receive through the U.S. CHIPS and Science Act. Adding another bearish catalyst, Reuters reported that Intel’s manufacturing of chips for Broadcom had not been successful.

Worries about government money

The U.S. has been aiming to improve its domestic chip manufacturing capabilities, and Intel has been at the center of the strategy. As part of the CHIPS act, Intel had been expected to receive $8.5 billion in direct funding an additional $11 billion in loans from the government.

The financial support would have made the company the biggest beneficiary of the CHIPS Act, but questions are now being raised as to whether the chip specialist will actually wind up receiving all of that funding. With Intel facing some significant financial headwinds and looking at a restructuring that could reportedly involve spinning off its chip fabrication business or selling off the Altera unit that specializes in programmable chips and other technologies, investors are worried that key public-sector support could weaken.

A negative report

Intel has been positioning chip fabrication for third-party customers as a key long-term growth driver, but doubts about the viability of the plan have risen amid signs of fault lines impacting the company. A report published by Reuters today is only adding to previously existing concerns.

According to the report, Broadcom’s recent tests of Intel’s 18A chipmaking process had not produced satisfactory results. Broadcom has reportedly decided that the advanced fabrication process’s yield is not reliable enough to move forward with high-volume chip production. Intel is trying to challenge Taiwan Semiconductor Manufacturing in the semiconductor fab space, and Reuter’s report suggests that the company is still significantly behind its rival in terms of manufacturing reliability. That’s not necessarily shocking.

Improving its competitive positioning against TSMC in the high-end chip fabrication space has always been a long-term project, and Intel is still in the relatively early stages of ramping up its contract fab business. Domestic chip production has become an increasingly important economic and national security interest for the U.S. and allied countries, and that’s helped the company attract large government subsidies. But with news that fabrication results missed Broadcom’s targets and emerging concerns about public-sector funding, there’s a high degree of uncertainty surrounding Intel’s outlook in the chip-fabrication space.