Tower counts its blessings on Intel deal cancelation

At the start of August, Israeli chipmaker Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE:TSEM) reported strong financial results for the second quarter of 2025, which led to a double-digit gain in the share price. In the following days most of these rises were wiped out but since mid-August the stock has been soaring on high trading volumes.

The result has been a 45% rise in the share price in less than a month. The chip company from Migdal Ha’emek now has a market cap of $7.566 billion. On the way it has surpassed the price at which it was supposed to have been sold to Intel in a deal that was canceled in 2023 after regulatory approval was not obtained in China. In hindsight it looks as though Tower can be satisfied with that cancelation, following the problems affecting Intel, which has replaced its management and is implementing a streamlining and reorganizational process including major cuts.

In early 2022, Intel announced that it was acquiring Tower for $5.4 billion ($53 per share) at a 60% premium on the share price at the time. Several months after the cancelation, Tower’s share price slumped to just $22 but has since soared to $67.65 at close of trade on Wall Street yesterday – 27% above the price of the Intel deal.

Benefiting from the Chinese restrictions

What explains the surge in recent weeks, and does the stock still have further to rise? Oppenheimer Israel senior analyst Sergey Vastchenok, points to several factors. “First of all, there is currently an ongoing positive sentiment towards the chip market, and we saw evidence of this in the last reporting season,” he says. “Tower stock, until recently, lagged a bit, and we have recently seen a trend in which investors are looking for exposure to AI through companies that have not yet attracted interest and have not been rising. Tower was a super-cheap company and even now, after the increases, it is trading at an EBITDA multiple of close to 10, compared with 20-plus and 30 for other stocks in the industry, so it is still one of the cheapest among chip stocks. The market has paid less attention to it, it has gone under the radar.”

The positive sentiment in the industry is influenced, among other things, by the moves of US President Trump, especially towards China. According to Vastchenok, “Trump is trying to restrict activity, and people understand that there is a lack of chip manufacturing capacity outside of China. Tower is one of the companies that has advanced factories in the US and is expanding them.”

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“Beginning to get credit”

With publication of the second-quarter reports, Tower CEO Russell Ellwanger said the company is strengthening its positioning as a key manufacturer for the next-generation high-performance communications ecosystem. This is mainly due to the expansion in the data center and AI market. And Vastchenok notes that Tower’s AI activity is already approaching 30% of its sales mix. He explains that in data centers there is importance and a lot of investment in optical communications, and Tower produces a chip for a specific component in it. It also operates in the RF field related to the mobile market, where after several difficult years there is progress.

Oppenheimer’s recommendation for Tower shares is “outperform” with a price target of $70, which is 4% above its current price. The price target price has been raised from $60 following the latest reports.

This week US investment house Benchmark also raised the price target for Tower stock from $66 to $73, and kept a “Buy” recommendation. Benchmark noted that following a meeting with Tower’s management, it maintains its confidence and optimistic outlook, and also positively noted the company’s steps to expand its production capacity. According to data from “The Wall Street Journal” and the TipRanks website, there are five analysts that cover Tower and all of them are positive, with an average price target higher than $70.

All this is a far cry from the situation 20 years ago when Tower was mired in debt. Ellwanger, who joined the company in 2005 during that crisis, was among the few who believed in its future, and has led the major change in the company’s fortunes.

After the cancellation of the sale, which forced Intel to pay compensation of $353 million to Tower, Ellwanger said: “I’m not saying it’s good that the deal didn’t happen, but it wasn’t a big slap in the face.”

“If the deal had gone through, Tower’s situation today would probably be less bright,” estimates Vastchenuk. “With what’s happening at Intel and the cuts of what’s not at the core of the business, and Tower wasn’t at the core.” The analyst still believes that Tower is undervalued and “is starting to get some of the credit it deserves. It’s coming eventually.”

Published by Globes, Israel business news – en.globes.co.il – on September 11, 2025.

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