TLDR
- Intel stock trades near $37, up 85% year-to-date after securing rumored AI chip deals and major strategic investments
- Nvidia’s $5 billion stake and U.S. government’s $10 billion CHIPS Act investment provide backing for turnaround efforts
- Q3 earnings due October 23 with analysts expecting continued losses as company targets 2026 return to profitability
- Wall Street consensus price target of $26 suggests 30% downside from current levels despite recent rally
- CEO Lip-Bu Tan cutting 20% of workforce while investing in 18A process and AI chip development
Intel shares closed at approximately $37 on October 17, marking a two-year high for the chipmaker. The stock has surged 85% year-to-date after nearly doubling from January lows.
Reports this week suggest Intel’s foundry division landed a major AI chip customer. Industry sources point to Microsoft as the likely client for custom Azure cloud accelerators.
The potential Microsoft deal represents a win for Intel’s struggling contract manufacturing business. Intel previously announced Microsoft as an 18A process partner in 2024, but actual production agreements remained unclear until now.
Nvidia created the biggest catalyst in September with a $5 billion investment for roughly 4% of Intel. The partnership aims to co-develop chips combining Intel CPUs with Nvidia GPUs.
Intel stock jumped 22.8% in a single day on the Nvidia news, the largest gain since 1987. The alliance between rivals signals confidence in Intel’s technology roadmap despite the company’s recent struggles.
The U.S. government converted $10 billion in CHIPS Act subsidies into equity, acquiring approximately 9.9% of Intel. Washington views the investment as critical for domestic semiconductor production and national security.
SoftBank’s Vision Fund added $2 billion in early September. Preliminary talks with Apple about a potential investment sent shares up 6% in late September, though no deal materialized.
Financial Challenges Persist Despite Rally
Second quarter revenue of $12.9 billion came in flat year-over-year. Gross margins under 30% and continued net losses highlight the work ahead.
CEO Lip-Bu Tan is cutting roughly 20% of the workforce to reach 75,000 employees by year-end. He’s also paused some fab construction projects to conserve cash.
Intel doesn’t expect profitability until 2026. Third quarter results due October 23 will show whether cost cuts are gaining traction.
The company unveiled Panther Lake processors for 2026 using its 18A process. However, reports suggest manufacturing yields remain problematic.
Intel is also developing Crescent Island, an AI GPU for 2026 launch. The delayed timeline gives competitors room to expand their advantages.
Wall Street Remains Cautious
AMD stock hit records around $240 on major AI deals with OpenAI and Oracle. Nvidia commands roughly 90% of the AI accelerator market with over $1 trillion in market value.
Intel’s $175 billion market cap sits at about half of AMD’s valuation. The competitive gap fuels skepticism about Intel’s comeback prospects.
Most analysts rate Intel as Hold or Sell. The consensus price target of $26 implies 30% downside from current levels.
HSBC and Citi both downgraded Intel in October, calling the rally “deal-driven” without solving core manufacturing issues. UBS countered with a $40 target based on foundry optimism.
CNBC’s Jim Cramer praised Tan’s deal-making ability but acknowledged Intel must prove execution. The stock trades at $37 as investors await Q3 results and signs of sustainable progress.
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