Intel (INTC) invested nearly five years making a promise that the market was skeptical about. The company dedicated over $100 billion to revamping its manufacturing capabilities, betting that it could once again manufacture the most sophisticated chips in the U.S.
For an extended period, the evidence suggested otherwise.
SANTA CLARA, CA - JANUARY 16: The Intel logo is displayed outside of the Intel headquarters on January 16, 2014 in Santa Clara, California. Intel will report fourth quarter earnings after the closing bell. (Photo by Justin Sullivan/Getty Images).
Nodes were consistently delivered late. Yield objectives were not achieved. Customers shifted to TSMC. The stock plummeted. Intel’s Foundry division reported an operational deficit of approximately $7 billion in 2023, with further losses projected through 2024 and 2025.
However, in the past few quarters, that narrative is beginning to shift.
Intel’s 18A process node - its most advanced version to date - is currently in commercial manufacturing. The company has attracted business from prestigious external clients. Its manufacturing facilities based in the U.S. are increasingly regarded as strategically essential.
Remarkably, the stock has surged nearly 3x over the past year.
Four particular advancements account for these gains and explain why further growth is feasible.
The catalysts
Elon Musk’s Terafab initiative will leverage Intel’s design, manufacturing, and packaging capabilities for AI chips intended for Tesla’s (TSLA) robotics project and xAI’s data centers. Terafab represents Musk’s plan to construct a domestically sourced AI computing infrastructure - from chip design to data center installation -thereby decreasing reliance on TSMC and Nvidia. Intel Foundry’s involvement may serve as a validation of the 18A's production readiness. The fact that Tesla, a firm with the financial resources and engineering capabilities to establish its own fabs, opted for Intel reinforces foundry credibility.
Intel reacquired Apollo Global’s 49% ownership of its Ireland fabrication facility for $14.2 billion. The original sale in 2023 served as a financing method: Intel required funds to support its expansion without straining a balance sheet already absorbing billions in annual losses. Regaining ownership may signal that Intel’s peak cash outflow period has concluded.
U.S. government CHIPS Act funding has converted a portion of Intel's capital risk into a federal obligation. Intel has received or is in line to receive approximately $8.5 billion in direct grants plus access to roughly $11 billion in government loans, together covering a material share of the Arizona and Ohio fab costs. The market is now assigning Intel Foundry a floor valuation consistent with a regulated infrastructure asset, not a cyclical manufacturer.
Ongoing U.S. - China trade tensions have elevated Intel’s domestic manufacturing presence as a strategically significant U.S. industrial resource. TSMC is responsible for producing the majority of the world’s leading-edge logic at facilities primarily located in Taiwan, and there is no effective backup plan if access to these fabs is compromised. Intel is now the sole company that provides such an alternative. Admittedly, external customer revenue continues to be limited, and utilization rates have potential for growth. However, the asset is in place and operational, and no one else is creating a viable substitute. That position holds significant value.
Intel’s CPUs are also anticipated to experience considerable demand as the AI sector matures. The same could also apply to AMD (AMD).
The Development of a $500 Billion Enterprise?
It must be noted, Intel shares appear to be pricey, trading at approximately 120x predicted 2026 earnings and 60x projected 2027 earnings, with revenue growth anticipated to be below 2% this year and around 7% next year. The market is evaluating the likelihood of Intel Foundry attaining a high-utilization, high-margin stable state by 2028 and thereafter. Despite the elevated valuation, there may be meaningful upside potential.
Here’s some straightforward math.
The global semiconductor industry is expected to surpass $1.6 trillion by 2030, more than doubling from 2024 levels. If Intel successfully captures, for instance, 5% of that market share, it equates to approximately $80 billion in annual foundry revenue. With a net margin of 25%, significantly lower than TSMC’s current 45% margins, that results in $20 billion in profit. A 25x valuation on the foundry sector implies a possible worth of $500 billion for that division. That figure considerably exceeds Intel’s current $300 billion market capitalization.
Intel’s foundry venture appears attractive, but substantial risk remains. If you wish to implement high-conviction, data-driven strategies across your entire portfolio without managing daily execution on your own, we can assist. Our Trefis High Quality Portfolio (HQ) strategy has outperformed its market benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000), delivering more than 105% returns since inception.
www.forbes.com
For an extended period, the evidence suggested otherwise.
SANTA CLARA, CA - JANUARY 16: The Intel logo is displayed outside of the Intel headquarters on January 16, 2014 in Santa Clara, California. Intel will report fourth quarter earnings after the closing bell. (Photo by Justin Sullivan/Getty Images).
Nodes were consistently delivered late. Yield objectives were not achieved. Customers shifted to TSMC. The stock plummeted. Intel’s Foundry division reported an operational deficit of approximately $7 billion in 2023, with further losses projected through 2024 and 2025.
However, in the past few quarters, that narrative is beginning to shift.
Intel’s 18A process node - its most advanced version to date - is currently in commercial manufacturing. The company has attracted business from prestigious external clients. Its manufacturing facilities based in the U.S. are increasingly regarded as strategically essential.
Remarkably, the stock has surged nearly 3x over the past year.
Four particular advancements account for these gains and explain why further growth is feasible.
The catalysts
Elon Musk’s Terafab initiative will leverage Intel’s design, manufacturing, and packaging capabilities for AI chips intended for Tesla’s (TSLA) robotics project and xAI’s data centers. Terafab represents Musk’s plan to construct a domestically sourced AI computing infrastructure - from chip design to data center installation -thereby decreasing reliance on TSMC and Nvidia. Intel Foundry’s involvement may serve as a validation of the 18A's production readiness. The fact that Tesla, a firm with the financial resources and engineering capabilities to establish its own fabs, opted for Intel reinforces foundry credibility.
Intel reacquired Apollo Global’s 49% ownership of its Ireland fabrication facility for $14.2 billion. The original sale in 2023 served as a financing method: Intel required funds to support its expansion without straining a balance sheet already absorbing billions in annual losses. Regaining ownership may signal that Intel’s peak cash outflow period has concluded.
U.S. government CHIPS Act funding has converted a portion of Intel's capital risk into a federal obligation. Intel has received or is in line to receive approximately $8.5 billion in direct grants plus access to roughly $11 billion in government loans, together covering a material share of the Arizona and Ohio fab costs. The market is now assigning Intel Foundry a floor valuation consistent with a regulated infrastructure asset, not a cyclical manufacturer.
Ongoing U.S. - China trade tensions have elevated Intel’s domestic manufacturing presence as a strategically significant U.S. industrial resource. TSMC is responsible for producing the majority of the world’s leading-edge logic at facilities primarily located in Taiwan, and there is no effective backup plan if access to these fabs is compromised. Intel is now the sole company that provides such an alternative. Admittedly, external customer revenue continues to be limited, and utilization rates have potential for growth. However, the asset is in place and operational, and no one else is creating a viable substitute. That position holds significant value.
Intel’s CPUs are also anticipated to experience considerable demand as the AI sector matures. The same could also apply to AMD (AMD).
The Development of a $500 Billion Enterprise?
It must be noted, Intel shares appear to be pricey, trading at approximately 120x predicted 2026 earnings and 60x projected 2027 earnings, with revenue growth anticipated to be below 2% this year and around 7% next year. The market is evaluating the likelihood of Intel Foundry attaining a high-utilization, high-margin stable state by 2028 and thereafter. Despite the elevated valuation, there may be meaningful upside potential.
Here’s some straightforward math.
The global semiconductor industry is expected to surpass $1.6 trillion by 2030, more than doubling from 2024 levels. If Intel successfully captures, for instance, 5% of that market share, it equates to approximately $80 billion in annual foundry revenue. With a net margin of 25%, significantly lower than TSMC’s current 45% margins, that results in $20 billion in profit. A 25x valuation on the foundry sector implies a possible worth of $500 billion for that division. That figure considerably exceeds Intel’s current $300 billion market capitalization.
Intel’s foundry venture appears attractive, but substantial risk remains. If you wish to implement high-conviction, data-driven strategies across your entire portfolio without managing daily execution on your own, we can assist. Our Trefis High Quality Portfolio (HQ) strategy has outperformed its market benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000), delivering more than 105% returns since inception.
Could Intel’s Foundry Be Worth $500 Billion?
Intel dedicated over $100 billion betting it could manufacture the most sophisticated chips in the U.S. For an extended period, the evidence suggested otherwise.
www.forbes.com
