Intel jumps after WSJ reports Qualcomm approached the struggling chipmaker about a deal

• Intel lost its chipmaking lead years ago and is struggling to regain it.
• Qualcomm could sell parts of Intel to other buyers, WSJ reported.
• Semianalysis' Dylan Patel said the potential deal would create duplicate intellectual property.

Qualcomm is interested in acquiring Intel, the Wall Street Journal reported Friday. It's the latest potential development in the sad decline of a US tech powerhouse.

A deal is not a certainty, and could face antitrust hurdles, WSJ explained, citing unidentified people familiar with the matter. Qualcomm could sell parts of Intel to other buyers to get any deal done, the newspaper added.

Intel shares surged about 10% in afternoon trading on Friday, following the WSJ report. It closed up 3.3% on the day, and added a little more in after-hours action.

Intel was once the world's largest chipmaker and a US technology powerhouse. Around 2018, this leadership began to crumble as TSMC steadily took over as the chip manufacturer of choice for most big tech companies, including Nvidia, Apple and Qualcomm.

Qualcomm makes chips used in smartphones, including Apple iPhones, a market Intel missed out on. Intel mostly sells chips for PCs and data center servers, although Nvidia's GPUs have made serious inroads into this lucrative data center business.

An "odd" fit

Semianalysis chief analyst Dylan Patel said Qualcomm and Intel would be an "odd" fit.

"It would result in a lot of duplicate intellectual property, so there would need to be significant cost cutting," he told Business Insider.

"Furthermore, Qualcomm has no ability to turn around the data center business, which is the most important one," he continued.

Qualcomm would also struggle to improve Intel's Foundry business, Patel added. This foundry business makes chips for other companies and competes (ineffectively so far) with TSMC, which is now the clear world leader.

An Intel spokesperson declined to comment. Qualcomm did not respond to a request for comment at the time of publication.

Pat Gelsinger took over Intel as CEO in 2021 and attempted to reverse the tech giant's downward slide. The company's revenue has declined in recent years while rivals like Nvidia, TSMC, and Broadcom are riding the artificial intelligence wave to new heights. So far, Gelsinger has been perceived as unsuccessful and the company announced plans for 15,000 layoffs last month.

On Monday, Intel announced a partnership with Amazon Web Services in which the chipmaker will produce custom designs for the cloud giant in what the companies called a "multi-year, multi-billion-dollar framework." Intel's stock shot up on Monday's announcement.

Intel has mostly missed the AI boom. Its Gaudi 3 AI chip, intended to compete with Nvidia and AMD, is expected to generate just $500 million in sales this year. Nvidia will pull in many billions of dollars in the same period.

Qualcomm has made moves toward competing more directly with Nvidia in the age of AI. The company joined a coalition called the UXL Foundation last year, along with Google and Intel with the objective of making hardware-agnostic software to go up against Nvidia's dominant CUDA platform.