5 Reasons Why I'm Optimistic About Intel's Turnaround
It won't happen overnight, but I believe the company is on the right track
Intel (INTC 0.00%↑) is a $94B market cap company. So, righting the ship won’t be immediate. Or easy. We may even see the stock range bound between $20-25 for another 12 months. But over the long-haul, I believe in the company’s turnaround. Here are five reasons why:
Intel 18A
Short for “18 Angstroms” and equivalent to 1.8 nanometers, 18A is the company's latest and most advanced chip manufacturing process. INTC hopes it will compete with rival chipmakers TSMC and Samsung. Two key differentiating features of the technology are 1) PowerVia, an innovative backside-power delivery system and 2) RibbonFET, a gate-all-around transistor.
Both these technologies enable smaller, faster, and more power-efficient semiconductors. PowerVia improves density and cell utilization resulting in improved performance per watt and RibbonFET enables accurate control over current flow and prevents power leakage.
In comparison to Intel 3 (INTC’s previous 3nm technology which launched in ‘24), 18A exhibits 15% better performance per watt and 30% better chip density.
TechInsights reports that Intel 18A scored 2.53 points on their rating system, higher than both TSMC N2 (2.27) and Samsung SF2 (2.19), making INTC’s 18A the frontrunner among 2nm nodes. In addition, Tom’s Hardware made projections earlier this year that Intel's 18A is faster than TSMC's N2 process nodes.
It’s important to note that although TechInsights and Tom’s Hardware are considered reputable sources, their 18A evaluations are likely based on estimates and that actual performance needs to be verified. Still, the interest and potential for 18A is there.
Microsoft (MSFT 0.00%↑) and Amazon Web Services currently have agreements in place with INTC. Nvidia (NVDA 0.00%↑), Broadcom (AVGO 0.00%↑) and AMD (AMD 0.00%↑) have also expressed interest and are currently evaluating the chips. And of course, if the tests are satisfactory, it could lead to lucrative manufacturing contracts.
INTC is on track to begin large-scale manufacturing of 18A chips in H2’25.
Intel Foundry Services
It’s well known that Intel Foundry Services (IFS) has recently been mired by a lack of execution and delays. In fact, the segment has not been profitable over the last few quarters (operating income of -$2.3B in Q1’25) and there are some calling for INTC to spin-off its Foundry business.
However, it’s important to note that IFS (in its current form, to serve outside customers) is relatively new. It launched in ‘21 and I believe it can be turned around and made profitable under the right leadership.
INTC has spent over $80B on foundry over the last five years. I think it’s an overly pessimistic view that all that capital was misallocated and will have no impact on future earnings. In the end, I believe it does and will count for something.
I also believe that Intel Foundry is the company’s biggest competitive advantage. IFS enables the company to handle all stages of manufacturing—chip design, foundry, and packaging—a potential cost-savings for future INTC customers.
Not to mention Intel is currently the only company with the capability to fabricate advanced chips (less than 2nm) in the U.S. It’s no secret that the U.S wants to bring back domestic chip manufacturing not only for national security reasons but also to reduce its reliance on foreign supply chains given that semiconductors are crucial to numerous industries and technologies.
The CHIPS Act enacted under the Biden administration awarded INTC with up to $7.9B in direct funding for its manufacturing projects in Ohio, Arizona, Oregon, and New Mexico. The CHIPS Act also has a 25% Investment Tax Credit for capital projects in which INTC would benefit.
Despite some fears that the statute may be scrapped, overtures by the Trump administration to onshore manufacturing jobs leads me believe that INTC will be a continued beneficiary in the future.
INTC product pipeline
In my view, Intel is positioned to reclaim semiconductor market share. Part of the company’s problem over the last few years was the lack of competitive products—either due to delayed launches and/or management missteps. Another contributing factor to INTC’s decline was the lack of foresight into AI demand. However, I believe it’s a different story in ‘25.
Intel has several chips in their product portfolio for both client and server CPUs: Panther Lake (client), Nova Lake (client), Sierra Forest (server), Granite Rapids (server), Clearwater Rapids (server), and Diamond Rapids (server).
The anticipated uptick in PC sales as consumers look to upgrade hardware after Microsoft discontinues support for Windows 10 could boost Intel’s revenue. AI-enabled PCs coming to market over the next few years could also be an incremental tailwind.
In terms of server CPU demand, hyperscalers are continuing to spend and INTC is poised to benefit from this favorable backdrop. Microsoft, Amazon, Meta, and Alphabet are expected to spend a combined $320B in capex in ‘25.
To compete with NVIDIA and AMD, Intel developed Gaudi 3 which is a chip that is used for both AI inference and training. The company has stated that their advanced accelerator outperforms NVIDIA H100 in several ways including better inference throughput, higher memory bandwidth, improved on-chip networking, and a lower total cost of ownership.
Additionally, INTC is also developing Jaguar Shores, the code name for their next generation inference-centric AI chip. It’s probably going to be manufactured using the new 18A process node and therefore will likely have all its benefits. The chip is being engineered for rack-scale inference systems which aligns with the needs of hyperscalers like Microsoft, Alphabet, and Amazon. Jaguar Shores is expected to be commercially available in ‘26.
Mobileye and other non-core assets
Over the years, Intel made several acquisitions outside their core business of semiconductor manufacturing. However, management recently emphasized they intend to realign and refocus the company—which is a good idea given their recent struggles and lack of execution.
In April, INTC sold off 51% of their stake in Altera—a field-programmable gate array company they originally acquired a decade ago. Their remaining stake in Altera is worth an estimated $4B.
Other non-core assets include Mobileye (autonomous driving systems) and Intel Capital (corporate venture capital arm). All combined, I estimate INTC’s non-core assets to be worth ~$16B (Intel currently has $8.9B in cash as of Q1’25).
Besides refocusing the company, spinning-off such assets could also reallocate capital more efficiently whether it be through upgrading Foundry, increasing R&D, or some other strategy.
Lip-Bu Tan
Perhaps the biggest reason I believe in INTC’s turnaround is CEO Lip-Bu Tan. He has both the technical background and the business acumen to pilot Intel back to its former glory. He’s an engineer by training (MIT grad) but also holds an MBA from The University of San Francisco. He founded venture capital firm Walden International and has extensive experience investing in various semiconductor start ups.
And most impressively, he was CEO of Cadence Design Systems (CDNS 0.00%↑) from 2009 to 2021 in which CDNS share price increased +3,200% and the company’s market cap increased from roughly $1B to $52B.
Since taking the reins at INTC in March ‘25, Tan has implemented several changes. He criticized the overly bureaucratic culture of middle management and is reducing the workforce by ~20% to create a flatter organizational structure. Tan also called for a more customer-centric Foundry.
It’s worth mentioning that Tan’s compensation package is largely performance based. It’s in his best interest to see INTC do well. He gets a base salary of $1 million, but his cash bonus of up to $2 million is tied to specific operational and financial goals. Shortly after becoming CEO, Tan also bought $25 million of INTC stock through a family trust with an average cost of ~$24/sh.
Disclosure: I have a position in INTC at the time of this publication.
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