Why Intel stock is winning today

Intel (INTC 4.45%) Shares are up in Monday trading on upbeat news for the company’s manufacturing business. The semiconductor specialist’s stock price was up 2.3% as of 1:15 p.m. ET. Shares rose as much as 4.7% earlier in the daily session.

After the market closed last Friday, Bloomberg published a report stating that Intel qualified to receive $3.5 billion in federal funding for semiconductor production for US national defense. In addition to suggesting substantial contract wins, the report bodes well for other grants and loans the company was poised to receive through the CHIPS and Science Act. But despite promising subsidy news and stock gains, there was also a bearish report for Intel’s design and manufacturing units.

Intel could still be central to the country’s chip strategy

The ability to manufacture advanced chips domestically has become a key economic and national security priority for the US government. Currently, the vast majority of high-performance chips used for artificial intelligence (AI) and other advanced applications are produced by Taiwan Semiconductor Manufacturing in Taiwan.

Intel has been at the center of US efforts to improve domestic manufacturing capabilities, but the company’s recent financial and technology struggles have created uncertainty around the plan. Bloomberg’s report that Intel is likely to receive new grants to make high-performance chips for the military and intelligence helps ease investor concerns.

If the company gets $3.5 billion in chip-making funding through the Pentagon’s Secure Enclave initiative, it would be a significant win for the company’s fabled business. It could also suggest that the company is likely still on track to receive the full $8.5 billion in direct financing and $11 billion in loans allocated through the CHIPS Act, despite the challenges facing the business.

Intel missed out on a fabulous deal for Sony’s next PlayStation

Reuters published a report this morning stating that Intel has lost a potential deal to design and manufacture chips that will be used in Sonyhis upcoming PlayStation 6 console. The deal could have generated billions of dollars in revenue for the chipmaker, but Sony reportedly made the decision not to use Intel’s services as early as 2022 due to price concerns. Instead, the design and manufacturing contracts were won by Advanced microdevices and TSMC respectively.

If Reuter’s report is correct, losing the PlayStation 6 hardware contracts would be a significant loss for Intel — but not surprisingly, the stock is still rising today. Government support is critical to Intel’s manufacturing business and the overall recovery effort, and the upbeat indicators on that front are far more significant than missing out on design and manufacturing deals for gaming hardware.