Intel spinoff and IPO could mean another attractive chip stock hitting the market at a future date

An old name is set to make new waves in the IPO market, although not immediately.

Chipmaker Intel announced this week that it’s planning to spin off its Programmable Solutions Group (PSG) at the beginning of 2024. It will also conduct an IPO for the new stand-alone entity at some point in the next two or three years. Intel will retain majority ownership in the new company but will also seek investors, and Sandra Rivera, an Intel executive vice president who currently leads Intel’s Data Center and AI operations, will become PSG’s CEO.

“Our intention to establish PSG as a standalone business and pursue an IPO is another example of how we are consistently unlocking more value for our stakeholders,” Intel CEO Pat Gelsinger said in a statement. “Sandra has proven herself by reinvigorating DCAI, placing it on a path for success. I am confident she will bring PSG that same dedication, energy and customer commitment.”

Notably, PSG’s spinoff would mark the second of its sort in recent years for Intel, which also spun off and conducted a successful IPO for Mobileye, a self-driving car company, in 2022. It’s also another IPO in the field-programmable gate array (FPGA) business, following Arm Holdings, which went public in September. FPGAs are a type of circuit that can be reconfigured or reprogrammed by end-users to fit specific requirements or use cases—hence, the term “programmable chips.”

For example, an aviation company may place an order for FPGAs and configure them for specific uses within that industry after they’ve arrived, rather than ordering the chips with preprogrammed specifications from the factory. While FPGAs tend to be less powerful and complex than many chips used to power, say, desktop computers, their flexibility and efficiency are a value-add in most circumstances.

Intel originally entered the FPGA market in 2015; it acquired the business unit when it purchased Altera for $16.7 billion. The demand for chips, amid a renaissance in artificial intelligence and machine learning, among other technologies, is surging, and Intel’s statement says that “PSG had delivered record revenues for a third consecutive quarter” during its second-quarter 2023 earnings call this year.

In spinning off PSG, Intel says the stand-alone company would be better able to grow and compete in the growing market.

“This is an incredibly exciting day for me and the PSG team,” said Rivera in the company’s statement. “Reestablishing PSG as a standalone business will enable us to unleash our full potential as we drive for leadership in this demanding and essential part of the semiconductor industry. Our strategic relationship with Intel will continue to be an advantage as it gives us maximum flexibility in how we address fast-growing markets like automotive and data center and communications.”