Shares of Intel have been under pressure this week since the chip maker announced a $20 billion stock offering. But one firm says it's excellent news for the company.

UBS analyst Timothy Arcuri wrote Wednesday that Intel's $20 billion stock offering will "remove an overhang" for the stock as it will allow the chip maker to fund its foundry buildout.

The stock offering will provide "bridge" funding through 2027 and 2028 for Intel, Arcuri wrote. He lowered his Intel price target to $112 from $121 and maintained a Neutral rating on the stock.

Intel stock rose 4% to $101.67 on Wednesday and is currently up about 0.1% for the week. The S&P 500 and the tech-heavy Nasdaq Composite rose 0.3% and 0.5%, respectively.

The company said late Monday it would increase the stock offering to $20 billion from $15 billion originally. It is planning to issue 210.5 million shares at a price of $95 a share. The stock fell 4.1% to close at $97.52 on Monday after Intel originally disclosed the fund-raising plan.

Arcuri added that if the transaction closes in the September quarter, it will only be "modestly dilutive."

He noted that Intel now seems to be well positioned with the stock offering and with prepayments and financial commitments from coming foundry deals with Alphabet-owned Google, Apple, Advanced Micro Devices, and SpaceX.

"We believe the raise will allow INTC to fund its foundry buildout," Arcuri wrote. "Overall we view the raise as a strong endorsement of INTC's confidence in its foundry road map."

The downside, however, is the impact on free cash flow as Intel steps ups capital spending.

UBS says Intel is unlikely to have positive free cash flow in 2027 and that the company will burn about $4 billion in 2028 before free cash flow turns positive in 2029.

Intel is investing heavily amid hopes that its current 18A and future 14A chip-manufacturing processes can attract outside customers and therefore offset the billions of dollars' worth of quarterly losses that it is booking in its foundry unit.