Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) stands to lose rather significantly as the Trump administration makes good on its commitment to onshoring manufacturing of the world’s most advanced AI chips.
As a work around, the Taiwanese behemoth could opt for a joint venture with the US based Intel Corp (NASDAQ: INTC), says Patrick Moorhead – the chief executive of Moor Insights.
Moorhead agreed that an all-out acquisition of INTC is unlikely due to national security concerns. But a joint venture “as a form of financing and potentially an IP sharing of some sort” was on the table, he argued in a CNBC interview on Friday.
Why would TSMC consider a joint venture with Intel?
Intel stock has rallied more than 20% ever since JD Vance reiterated the new government’s commitment to making sure that the most sophisticated chips will be manufactured in the US.
Moorhead sees TSMC as the “biggest loser” in the aftermath of such a potential regime shift as it’s currently the leading provider of the advanced AI chips but it makes them primarily in Taiwan.
Additionally, Intel’s latest 18A process is immensely competitive and is capable of stealing share from Taiwan Semiconductor Mfg. Co. Ltd. as well, he added.
“You can imagine the pressure that Trump administration would be putting on right now on the Nvidias, the Broadcoms, the Marvells to motivate them to take a second look at this.”
Put together, these developments could make TSMC explore a joint venture with Intel – one that could materially benefit the latter in terms of capital, according to Moorhead.
What JD Vance’s remarks may mean for INTC
Patrick Moorhead expects Intel to benefit from “some tax breaks on manufacturing” as part of the government’s broader commitment to onshoring chip production as well.
All in all, he’s convinced that INTC shares have now bottomed.
“One of the reasons its designs didn’t go over as well as they could have, was because it was on a less than competitive manufacturing process. That’s changing with 18A,” he noted in the CNBC interview.
Note that Intel stock currently pays a dividend yield of 2.07% that makes it all the more attractive to own at writing.
Intel’s recent quarter financial highlights
Moorhead’s remarks arrive a couple weeks after Intel reported better-than-expected results for its fourth financial quarter.
The chip giant earned 13 cents a share on $14.26 billion in revenue – ahead of 12 cents per share and $13.81 billion that experts had forecast. In the earnings release, INTC confirmed that it was “taking actions to enhance our competitive position and create shareholder value.”
Intel is also looking for a potential suitor for a minority stake in Altera, the field-programmable gate array chips business it acquired for $14.5 billion in 2015.
The move will likely free up some capital that Intel could use to drive future growth.
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