Why Intel Stock Plunged Today

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

Bloomberg published a report today indicating that there are now doubts about whether Intel will receive the roughly $19.5 billion in funding it expected to receive through CHIPS and the Science USA Act. Adding another bearish catalyst, Reuters reported that Intel is making chips for Broadcom he had not been successful.

Concerns about government money

The US aimed to improve its domestic chip manufacturing capabilities, and Intel was at the heart of the strategy. As part of the CHIPS act, Intel was expected to receive $8.5 billion in direct funding and $11 billion in additional government loans.

The financial support would have made the company the largest beneficiary of the CHIPS Act, but questions are now being raised about whether the chip specialist will actually end up receiving all that funding. With Intel facing some significant financial difficulties and looking at a restructuring that could involve spinning off its chip business or selling its Altera unit, which specializes in programmable chips and other technologies, investors are concerned that key support from the public sector could weaken.

A negative report

Intel has positioned making chips for third-party customers as a key driver of long-term growth, but doubts about the plan’s viability have grown amid signs of trouble plaguing the company. A report published today by Reuters only adds to the pre-existing concerns.

According to the report, Broadcom’s recent tests of the Intel 18A chip manufacturing process did not yield satisfactory results. Broadcom decided that the yield of the advanced manufacturing process was 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 the company is still significantly behind its rival in manufacturing reliability. That’s not necessarily shocking.

Improving its competitive position against TSMC in the high-end chip space has always been a long-term project, and Intel is still in the relatively early stages of growing its fabled business. Domestic chip production has become an increasingly important economic and national security interest for the US and allied countries, and this has helped the company attract large government subsidies. But with manufacturing results missing Broadcom’s targets and emerging concerns about public sector funding, there is a high degree of uncertainty surrounding Intel’s prospects in the chipmaking space.