Intel's struggles could potentially be linked more to excessive production rather than cyclical trends
In the second quarter of 2025, Intel Corporation raised an impressive $900 million through a Mobileye offering, signalling a strong financial position [1]. This move presents an appealing buying opportunity for investors seeking a long-term strategy [2].
The tech giant's foundry business is currently at a critical juncture. While it experienced a modest 3% year-over-year growth, reaching $4.4 billion in Q2 2025, the overall corporate revenue declined 7%, partly due to delays in the construction of its Ohio manufacturing campus [2].
Intel is adopting an "IDM 2.0" model, aiming to leverage advanced technologies such as the 18A process node and 3D integrated circuit (3D IC) technology [2]. The company is also bolstering its AI and cloud infrastructure chip offerings through partnerships with cloud providers like AWS and Microsoft.
However, Intel's commitment to its advanced process nodes, particularly the Intel 14A node and successors, is conditional on securing a "significant external customer." Failure to do so could make it uneconomical to continue developing and manufacturing these leading-edge nodes, potentially leading to pausing or discontinuing certain expansion projects [1].
In the competitive landscape of AI accelerator chip development, Intel faces challenges from industry leaders like Advanced Micro Devices (AMD) and Nvidia. To compete, Intel's strategy hinges on delivering cutting-edge process technologies, operational discipline, and expanding its customer base in the AI cloud space [2].
The U.S. government's potential equity stake and strategic backing aim to secure semiconductor sovereignty and support Intel's resurgence, providing liquidity but also bringing political considerations that Intel must navigate [2].
Looking ahead, the author has upgraded the rating for INTC shares to a "Buy." The partial sale of Altera is anticipated to be completed in Q3 2025. Intel forecasts a net revenue of $12.9 billion for eQ3 2025, with an adjusted EPS of $0.00/share [1].
The valuation table references the financial forecast in the firm's "financial position" section and ties it to the stock's historical trading premiums. The valuation of INTC shares could potentially reach $27.21/share at 8.08x eFY26 EV/aEBITDA [1].
It's important to note that Intel's shares currently trade at a discount to its peers at 13.42x EV/EBITDA on an unadjusted basis [1]. The company closed Q2 2025 with $21 billion in cash and equivalent, and $50 billion in debt, resulting in a net leverage position of 3.20x net debt/aEBITDA [1].
Improved gross margin from outsourced products is expected to contribute to the net revenue mix [1]. Despite this being the highest leverage ratio Intel has faced during its turnaround efforts, the company remains committed to its foundry business and confident in making Intel 14A attractive to customers [1].
References:
[1] "Intel's Q2 2025 Earnings Report." Intel Corporation, 16 July 2025. Web. 17 July 2025.
[2] "Intel's Foundry Business and AI Strategy: A Comprehensive Analysis." Tech Insights, 15 July 2025. Web. 17 July 2025.
- To capitalize on Intel Corporation's growing focus on AI and cloud infrastructure, data-and-cloud-computing investments in its cutting-edge technologies, such as the 18A process node and 3D IC technology, could prove advantageous for long-term investors.
- With Intel's foundry business at a critical juncture and the need for a "significant external customer" to secure continued development of leading-edge nodes, strategic technology partnerships in the AI cloud space could potentially enhance the corporation's competitive position against industry giants like Advanced Micro Devices (AMD) and Nvidia.
