Intel shares surge 7% as its self-driving car unit takes off

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Intel shares surge 7% as its self-driving car unit takes off

Visitors are seen at the Intel booth during the China Digital Entertainment Expo and Conference, also known as ChinaJoy, in Shanghai.

On Tuesday, Reuters- Intel Corp shares surged 7% as Wall Street cheered the chip giant's move to take its self-driving car unit public at a time when global carmakers are spending billions of dollars to transition to electric vehicles.

The chipmaker's shares have barely budged this year, making them less than a 40% rise in the Philadelphia SE Semiconductor Index, as Intel struggles to ramp up its technology and catch up with rivals in making more energy-efficient microprocessors.

Tuesday's gains will help Intel add $17 billion to its market capitalization. Early in the day, shares of AMD, Nvidia and Qualcomm were up.

Mobileye, an Israeli company that Intel bought for $15 billion a few years ago, could be valued at more than $50 billion during its initial public offering in mid- 2022, sources told Reuters.

Aaron Rakers, Wells Fargo analyst, said that the valuation puts Mobileye more than 35 times ahead of 12 months TTM sales, a metric that indicates how much money it has raked in over a year.

Mobileye has a large list of clients, including BMW, Audi, Volkswagen, Nissan, Honda and General Motors.

Automakers have been using its technology to equip their cars with driver-assistance systems, or experiment with self-driving technology in their shift toward electric vehicles.

That is what would give a possible high valuation to Mobileye that eventually this is going to be something that's going to be deployed to most vehicles around the world, according to Louis Miscioscia, the head of Daiwa Capital Markets America.

Intel expects Mobileye's revenue to grow over 40% this year.

Rather than try to compete with its potential foundry customers in the automotive market, it can serve as a findry of choice for more automotive chipsets suppliers as well as auto manufacturers that may want to adopt its in-house chips, said Kinngai Chan, a Summit Insights Group analyst.