Intel - gamebastion.com

A potential deal to buy Intel could accelerate Qualcomm's diversification but will burden the smartphone chipmaker with a loss-making semiconductor manufacturing unit that it may struggle to turn around or sell, analysts said.

A buyout will also face tough antitrust scrutiny globally as it would unite two crucial chip firms in what would be the sector's biggest ever deal, creating a behemoth with a strong share of the smartphone, personal computer and server markets.

Shares of Intel rose nearly 3% on Monday, after media reports late on Friday about Qualcomm's early-stage approach for the struggling chipmaker. Qualcomm's shares were down 1.8%.

"The rumored deal between Qualcomm and Intel is intriguing on many levels and, from a pure product perspective, makes a certain degree of sense as they have a number of complementary product lines," said TECHnalysis Research founder Bob O'Donnell.

"The reality of it actually occurring, however, is very low. Plus, it is unlikely Qualcomm would want all of Intel and trying to break apart the product business from the foundry business right now just would not be possible," he said.

Once the dominant force in the semiconductor industry, five-decade-old Intel is facing one of its worst periods as losses mount at the contract manufacturing unit it is building out in hopes of challenging TSMC.

Intel's market value has fallen below $100 billion for the first time in three decades as the company has missed out on the generative AI boom after passing on an OpenAI investment.

As of last close, its market capitalization was less than half that of potential suitor Qualcomm, which has a value of about $190 billion.

Considering Qualcomm had around $7.77 billion in cash and cash equivalents as of June 23, analysts expect the deal will mostly be funded through stock and would be highly dilutive for Qualcomm's investors, likely raising some apprehension.

Qualcomm, which also supplies to Apple, has quickened its efforts to expand beyond its mainstay