Shares of tech powerhouse Intel (NASDAQ:INTC) popped higher on Tuesday following an announcement that the government of Israel agreed to give the company a $3.2 billion grant. On the other end of the deal, Intel will build a new $25 billion chip plant in the southern region of the nation. Subsequently, INTC stock popped higher on the underlying win-win prospect.
According to a Reuters report, the deal represents the largest investment ever by a company in Israel. Notably, a bit under 10% of Intel’s global workforce operate in Israel, thus demonstrating a long history of cooperation. Under the latest agreement, Intel will expand at the Kiryat Gat site, where the tech firm already runs an existing chip plant.
Per the company’s statement, the deal is an “important part of Intel’s efforts to foster a more resilient global supply chain, alongside the company’s ongoing and planned manufacturing investments in Europe and the United States.”
Ofir Yosefi, deputy director general of Israel’s Investments Authority, noted that Israel chose a higher grant and tax rate over an offer for a lower grant and tax rate. Following an extensive review and independent analysis to determine economic viability, the assessment concluded that Israel would reap greater fiscal and economic benefits.
INTC Stock May Benefit from a Mutually Agreeable Deal
Naturally, one of the biggest benefits to Israel is the expectation for the deal to yield several thousand jobs. Intel first started a presence in the country in 1974 and now operates four development and production sites. In total, the tech giant employs nearly 12,000 people there while indirectly employing another 42,000 more.
However, the positives don’t just run along a one-way street. For INTC stock, the deal should provide fuel for the underlying company’s competition in the global chip race. Many other semiconductor specialists – including Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) – have jumped ahead in the race as innovations such as generative artificial intelligence bolster demand for advanced chips.
Why It Matters
Currently, Wall Street analysts within the past three months have pegged INTC stock a consensus hold. This assessment breaks down as five buys, 20 holds and three sells. The average price target sits at $40.42, implying more than 19% downside risk.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
