Intel Stock Gains on New Strategy — $20 Billion Investment in Two New Arizona Chip Plants

By Avi Ben Ezra Wednesday, March 24, 2021

Intel stock has gained more than 4% in the pre-market trading session today after the company presented an aggressive and ambitious strategy to restructure its tech business.

Intel headquarters in California.

Two New Chip Plants in Arizona, 7nm Coming in 2023

During the much-anticipated “Intel Unleashed: Engineering the Future” virtual event held on Tuesday, the new CEO Pat Gelsinger presented a new strategy, “IDM 2.0,” which marks a major evolution of the company’s integrated device manufacturing (IDM) model.

In this context, Gelsinger said that his business will invest about $20 billion to build two new chip plants in Arizona, a piece of information that helped Intel stock to surge higher. The new CEO also talked about the plans for Intel to become a major provider of foundry capacity in the US and Europe. These two facilities will create over 3,000 high-paid tech jobs and more than 15,000 jobs for local staff.

“Intel is the only company with the depth and breadth of software, silicon and platforms, packaging, and process with at-scale manufacturing customers can depend on for their next-generation innovations. IDM 2.0 is an elegant strategy that only Intel can deliver – and it’s a winning formula,” said Gelsinger during the event.

“We will use it to design the best products and manufacture them in the best way possible for every category we compete in.”

The “IDM 2.0” strategy is built on three key pillars: 1) The company’s global, internal factory network for at-scale manufacturing, 2) Bigger use of third-party foundry capacity, and 3) The formation of a new business division “Intel Foundry Service,” headed by chip industry expert Dr. Randhir Thakur.

“We will pursue customers like Apple” for Intel’s foundry business,” Gelsinger added.

Moreover, Gelsinger updated investors on Intel’s efforts to build their first CPU. The company’s 7-nanometer chips are on track to hit a milestone in Q2 this year, with the release planned for 2023. The tech business aims to produce the majority of components in-house.

In a separate press release, Intel announced it has witnessed a strong order book recently. As a result, the tech business is expecting to exceed the previously-communicated guidance for the ongoing Q1. However, the company added that it is facing supply constraints.

Intel also presented full-year guidance for its business that projects the tech company to earn $4.55 in adjusted earnings per share, which is lower than the $4.77 per share Wall Street expected. Business revenue is projected at $72 billion, again lower than the $72.94 billion that the market analysts expected.

Still, Intel stock reacted positively to “IDM 2.0” and to the fact that the tech company is looking to spend $20 billion in capital expenditures (CapEx) this year, which is much higher than the $14.59 billion expected from the surveyed analysts.

Intel stock fell over 3% yesterday in anticipation of the virtual event, but an ambitious and confident presentation from Gelsinger pushed Intel stock higher to trade more than 4% higher in pre-open Wednesday.

Summary

Intel presented its new “IDM 2.0” strategy and announced plans to invest $20 billion in two new chip plants in Arizona. This news, coupled with positive updates related to 7-nanometer chips, has helped drive Intel stock higher today.

About the Author


Headshot of Avi Ben Ezra

Avi Ben Ezra is the CTO and Co-founder of SnatchBot and SnatchApp (Snatch Group Limited). He leads the Group’s long-term technology vision and is responsible for running all facets of the tech business which includes being the architect of the platforms and UI interfaces.

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