Qualcomm Inc. ( QCOM ) is reportedly considering a buyout of Intel Corp. ( INTC ) , a move that could significantly diversify Qualcomm’s product offering. However, analysts are warning of potential challenges that could hinder the success of this acquisition.

What Happened: Qualcomm’s interest in acquiring Intel ( INTC ) has been met with skepticism from analysts, reported Business Insider. The potential deal, which could help Qualcomm ( QCOM ) expand, is seen as a risky move due to Intel’s struggling semiconductor manufacturing unit.

Intel’s shares have plummeted approximately 77% from their 52-week high, making the company an attractive target not just for Qualcomm ( QCOM ) but also for Apollo Global Management ( APO ) , which reportedly proposed to make an equity-like investment of up to $5 billion in the company.

However, Stacy Rasgon, a prominent chip analyst from Bernstein, expressed skepticism about the potential deal. “We would prefer that Qualcomm ( QCOM ) not pursue this as it seems very risky to us given uncertain returns,” Rasgon and his team wrote.

Qualcomm ( QCOM ) aims to diversify its revenue streams by entering the PC and data center markets, which Intel ( INTC ) dominates. However, Intel’s semiconductor factories, or fabs, pose significant challenges. Rasgon noted that Intel ( INTC ) has struggled to manage its fabs, allowing competitors like TSMC to gain an edge.

Rasgon also highlighted the political importance of Intel’s U.S.-based fabs in Arizona, Oregon, and New Mexico. He speculated that Qualcomm ( QCOM ) might sell these fabs if the acquisition goes through, but questioned whether Intel ( INTC ) is desperate enough to consider such a move.

“Is Intel desperate enough to seriously consider something like this? We’re not so sure,” Rasgon and his team concluded.

Why It Matters: The potential acquisition of Intel ( INTC ) by Qualcomm ( QCOM ) could face significant hurdles, according to analysts. The deal could reportedly encounter rigorous antitrust scrutiny globally, given that it would merge two major chip firms. This could create a giant with significant market shares in smartphones, PCs, and servers.

Benchmark analyst Cody Acree said the acquisition is “logically unlikely.” According to Acree, Qualcomm ( QCOM ) would need to offer a compelling 40% to 50% premium over the current trading price of around $22 for shareholders to take the deal seriously. However, the regulatory scrutiny surrounding the transaction may be too difficult to overcome.

Meanwhile, Intel ( INTC ) has been facing its own challenges, with CEO Pat Gelsinger presenting a comprehensive plan to the board in September. The plan focuses on asset sales and cost reductions, including halting a $32 billion project in Germany.

If the Qualcomm-Intel deal goes through, it could result in one of the largest M&A deals ever, surpassing Microsoft Corporation’s $69 billion acquisition of Activision Blizzard.

Price Action: Intel’s shares closed 3.3% higher on Monday at $22.56, while Qualcomm’s shares closed 1.75% lower at $165.96, according to Benzinga Pro data.

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