Intel Corporation (NASDAQ:INTC) saw its shares climb 5.2% in premarket trading on Wednesday following a Reuters report that SK Hynix is in exploratory discussions to bring memory-chip production to Intel's delayed Ohio manufacturing site. The potential deal, which could take the form of a lease or a broader venture involving cloud customers, directly addresses the central challenge of Intel's turnaround: attracting enough external volume to make its massive fab investments profitable.
SK Hynix could provide the scale Intel needs
Intel has invested tens of billions of dollars in an effort to become a credible alternative to TSMC, but advanced semiconductor manufacturing only becomes financially viable when expensive fabrication plants run at high utilization rates. The Ohio project, announced in 2022 as part of a US manufacturing push, has seen its first two plants delayed to 2030 and 2031. Bringing in SK Hynix, the world's leading supplier of high-bandwidth memory (HBM), could help fill that capacity and ease Intel's financial burden.
According to Reuters, the talks are preliminary and no structure has been agreed. One scenario involves SK Hynix leasing part of the Ohio facility, while another could create a joint venture with Intel and major cloud providers seeking secure memory supplies. The report lands during a memory shortage driven by AI demand, giving any US-based memory production strategic weight.
Wall Street's bullish thesis gains traction
The market's reaction aligns with a bullish narrative that analysts had begun building before Wednesday's news. Tigress Financial raised its Intel price target to $145 from $118 on Tuesday, maintaining a Buy rating and describing the company as being in an “accelerating AI-driven turnaround.” That target implies nearly 50% upside from Intel's Tuesday close of $97.14, far above the consensus target of about $115.74. Tigress cited stronger Xeon demand, improving 18A process execution, operating leverage, and the Terafab partnership as reasons manufacturing economics could improve.
Northland Securities made a similar argument earlier this month, upgrading Intel to Outperform with a $120 target after seeing “material progress” in the turnaround. Analyst Gus Richard said Terafab could “materially benefit Intel's foundry business” by providing the scale its process technology has historically lacked. SK Hynix potentially using Intel capacity gives investors another route to that outcome.
A 290% rally leaves little room for error
The challenge is that Intel shares have already risen about 292% over the past year. That initial rally reflected growing optimism about Intel's manufacturing execution and CPU business. The next phase requires evidence that new partnerships translate into higher utilization and profits. There are also obstacles to the SK Hynix talks. As per reports, Seoul could scrutinize any transfer of advanced DRAM or HBM production because those technologies are strategically sensitive. Manufacturing chips in the US is also more expensive than in South Korea.
Piper Sandler analyst David O'Connor recently initiated Intel at Neutral with a $110 target, saying he would “wait for a better entry point,” according to TipRanks. That caution matters after such a powerful rally. Intel now trades at a valuation that increasingly assumes its turnaround will work.
The broader semiconductor sector has been volatile, with SK Hynix and Samsung rising recently despite a US chip rout, and BofA projecting the semis market to hit $3.2 trillion by 2030. Intel's potential deal with SK Hynix could be a significant step toward securing its foundry future, but investors will need to see concrete agreements and utilization gains before fully buying into the revival story.
This article is for informational purposes only and does not constitute financial advice.
