Intel raises $20 billion from upsized share sale: Where the money will go?

Intel announced on Tuesday that it raised $20 billion in an upsized share sale, about one-third more than it initially planned. The chipmaker said on Monday it aimed to raise $15 billion through the share sale.

The chipmaker priced the offering at $95 per share, a 6.5% discount to Friday’s closing price, according to Bloomberg calculations. Sources close to the development also told Bloomberg that the share sale drew more than $100 billion in demand.

Once a dominant force in the global chip industry, Intel is investing heavily in new facilities and advanced packaging capabilities as it seeks to challenge industry leaders such as TSMC in contract chip manufacturing.

Why did Intel increase its stock offering?

It is no secret that Intel needs the money because it is spending heavily to expand its chip production.

• Intel intends to use the net proceeds from the offering for general corporate purposes, which may include, but are not limited to, capital expenditures and working capital, the company said
• The offering is intended to further enable Intel to pursue the growth opportunities ahead while maintaining a strong balance sheet and its commitment to an investment-grade rating, it added

“Customers continue to signal a strong and sustainable demand environment, driven by unprecedented investment in AI compute. Progress in emerging areas, including physical AI, purpose-built silicon, advanced packaging and external wafers, represents significant growth opportunities for Intel.”

Last month, Intel posted its fastest revenue growth in nearly 15 years and raised its capital expenditure guidance to $20 billion, citing strong customer demand.

Intel shares movement

Shares were up 0.5% at $97.99 in premarket trading on Tuesday. The stock fell 4.1% to close at $97.52 on Monday when Intel originally disclosed the fundraising plan

Several analysts have said Intel's surging share price has increased the chances of an equity raise to help fund its expansion plans.

"As a capital-intensive business that went a long way to wrecking its own balance sheet and prospects by focusing on financial engineering rather than physical engineering, courtesy of $82 billion of share buybacks in the 2010s, it makes perfect sense for Intel to raise money, especially after a five-fold increase in the stock price since last August," Russ Mould, investment director at AJ Bell told Reuters.

Investors are still willing to invest in AI

The deal shows that investors are still willing to invest in AI-related companies.

Alphabet Inc. is in the process of raising up to $85 billion through equity offerings, including at-the-market sales and equity-linked deals. And Oracle Corp.’s fundraising plans include a $20 billion at-the-market sale.

South Korean memory chipmaker SK Hynix Inc. raised $26.5 billion in its debut offering of American depositary receipts, the largest-ever listing by a foreign company on a US exchange.

Its rival, CXMT Corp., raised about $9.9 billion last month in a near-Chinese record initial public offering and subsequently became the largest mainland-listed company.