To The Moon

$Intel(INTC)$

Intel has long been regarded as one of the foundational companies of modern computing, yet in recent years, its story has become one of missed opportunities, slowing innovation, and an increasingly uphill battle to compete against faster-moving rivals. Once the undisputed leader in semiconductor design and manufacturing, the company now finds itself at a crossroads—caught between stagnant growth in its core markets and immense costs associated with its ambitious push to reinvent itself as a global foundry leader.

This past weekend, a development emerged that may alter the trajectory of Intel’s future: the United States government announced it would acquire a roughly 10% stake in the company. This multi-billion-dollar investment represents more than a financial lifeline—it is a declaration of national strategy. With Washington effectively underwriting Intel’s transformation, investors are now forced to reassess whether the long-maligned chipmaker could be on the cusp of a new era of relevance, profitability, and strategic importance.

The Intersection of Industry, Politics, and National Security

The semiconductor industry has quietly become one of the most important arenas in the global balance of power. Modern economies run on chips, and as artificial intelligence, cloud computing, and advanced defense technologies proliferate, access to leading-edge semiconductor capacity has become a matter of national security.

For years, the vast majority of the world’s most advanced chips have been manufactured by Taiwan Semiconductor Manufacturing Company (TSMC). This concentration of supply represents both an economic choke point and a geopolitical vulnerability. A single disruption—whether due to pandemic, natural disaster, or geopolitical conflict—could ripple through the global economy, crippling industries from consumer electronics to defense systems.

It is within this context that the U.S. government has chosen to take a direct stake in Intel. The move is not merely an industrial subsidy, but rather a calculated attempt to ensure redundancy, resilience, and strategic independence in semiconductor production. By anchoring Intel’s capital-intensive foundry expansion, Washington is betting on the company’s ability to provide a domestic counterweight to Asia’s manufacturing dominance.

Applause from Industry Titans

The significance of the announcement was underscored by the endorsements of several industry leaders. Microsoft CEO Satya Nadella emphasized the urgency of rebuilding America’s chipmaking base, describing semiconductors as the backbone of both economic growth and technological sovereignty. Michael Dell, founder of Dell Technologies, pointed to Intel’s central role in the U.S. computing ecosystem, stressing the necessity of close public-private collaboration.

Perhaps most striking was the commentary from Matt Garman, CEO of Amazon Web Services, who called U.S. semiconductor investment one of the most important technological and national security imperatives of our time. His framing highlighted a broader reality: cloud computing, AI, and defense modernization all rely on access to leading-edge chips. The absence of domestic manufacturing capacity represents a strategic liability that the U.S. can no longer afford.

Anatomy of the Deal

The mechanics of the U.S. government’s investment reveal a shift from traditional subsidy models. Building on the earlier CHIPS and Science Act, which earmarked billions in grants for domestic semiconductor production, this new arrangement provides Intel with approximately $9 billion tied to its U.S. foundry expansion.

In exchange, the government receives a 10% ownership stake—equivalent to roughly 433 million shares at $20.50 apiece—along with warrants for an additional 5% contingent on Intel’s maintaining majority ownership of its foundry business. Should Intel dilute its foundry stake below 51%, the government could increase its ownership, ensuring alignment between federal objectives and corporate strategy.

The implications are significant: for the first time, U.S. taxpayers will share directly in the equity upside of a strategic industrial investment. While the government will not hold operational control or voting power, its stake underscores the recognition that advanced manufacturing is too critical to be left entirely to market forces.

Intel’s Current Position: A Troubled Balance Sheet and Weak Fundamentals

While the strategic rationale is clear, Intel’s operating performance paints a sobering picture. In its most recent quarter, the company reported $12.9 billion in revenue—up just 0.2% year-over-year. In an industry where rivals like Nvidia and AMD are posting double-digit growth, flat results signal not stability, but decline.

Even more concerning, Intel’s gross margins fell by nine percentage points compared to the prior year. Margin compression of this magnitude typically reflects pricing pressure, competitive weakness, or rising costs—none of which inspire confidence. The company also reported negative earnings, underscoring the extent of the financial challenges.

Intel’s legacy businesses, including its client computing group (PC chips) and data center/AI unit, continue to generate operating profit—around $3 billion in the most recent quarter, equivalent to a $12 billion annual run rate. However, these profits are being offset by the foundry segment, which posted nearly $3 billion in quarterly losses. The foundry, which is intended to be Intel’s future growth engine, is currently a drain on resources.

The Foundry Gamble

Intel’s foundry ambitions represent both its greatest risk and its greatest potential reward. The logic is clear: the world needs alternatives to TSMC, and Intel is the only U.S. company with the scale, expertise, and strategic importance to play that role.

However, building a foundry business from scratch is enormously capital-intensive and fraught with execution risks. Intel has already sunk billions into its expansion, yet profitability remains elusive. In the most recent quarter, the foundry division alone posted losses exceeding $3 billion.

The U.S. government’s investment is effectively a bridge across this “valley of death.” It provides Intel with the resources to continue building capacity in the hope that scale, technology, and customer demand will eventually transform the division into a profitable enterprise. The challenge lies in competing with TSMC, whose most recent quarterly results showed $30 billion in revenue, 59% gross margins, and 50% operating margins—benchmarks Intel can only aspire to.

Leadership Transition: The Lip-Bu Tan Factor

If there is one reason for optimism, it lies in leadership. In March, Intel appointed Lip-Bu Tan, former CEO of Cadence Design Systems, as its new chief executive. Tan is widely credited with transforming Cadence during his 12-year tenure, doubling revenue, expanding profitability, and driving a staggering 3,200% increase in shareholder value.

Tan’s reputation as a customer-focused innovator aligns closely with Intel’s current needs. The company has been plagued by cultural inertia, delayed product rollouts, and eroded customer trust. A reinvention led by a proven operator could provide the discipline and vision required to restore competitiveness.

Intel’s management has already signaled its intention to prioritize profitability, with a stated goal of achieving 50% gross margins on future products. While ambitious, this target reflects the level of discipline required to restore credibility with both customers and investors.

Valuation: Assessing Upside and Downside

At present, Intel’s diluted market capitalization stands at roughly $125 billion. By comparison, its two core profitable segments—the client computing and data center/AI businesses—could be worth between $120 billion and $180 billion based on normalized profit multiples. This suggests that the market is valuing the company’s legacy businesses at fair value, while assigning little to no upside for the foundry.

The central question, then, is whether the foundry can become profitable. If Intel can achieve just 20% of TSMC’s current scale—$24 billion in annual revenue—with 30% operating margins, the division could generate $7 billion in operating profit. Applying a conservative 10x multiple would imply $70 billion in additional equity value, effectively doubling Intel’s market capitalization.

This scenario is speculative, but it highlights the asymmetric potential. The downside risk lies in continued stagnation, debt burdens, and failure to execute. The upside lies in capturing even a fraction of the global foundry market—a prize that could redefine Intel’s valuation.

Risks: Execution, Competition, and Policy Overhangs

Investors should not underestimate the risks. Intel faces formidable competitors in AMD, Nvidia, and TSMC—companies that are leaner, faster, and currently more technologically advanced. The foundry business is a ruthless arena, where even minor delays or technical setbacks can translate into billions in lost revenue.

Moreover, government ownership introduces complexity. While Washington’s financial stake provides strategic alignment, it may also impose political constraints. Intel could be pressured to prioritize national security objectives over shareholder returns, potentially sacrificing profitability in favor of capacity or redundancy.

Finally, Intel carries significant financial obligations, including $50 billion in debt and rising interest expenses. Even with government support, the company must manage its balance sheet carefully to avoid overextension.

A Speculative but Strategic Opportunity

The case for Intel rests on three pillars: government alignment, proven leadership, and undervalued core businesses. The U.S. government’s stake ensures long-term policy support, Lip-Bu Tan provides a credible blueprint for reinvention, and Intel’s legacy divisions provide a valuation floor that largely underpins today’s market cap.

The foundry remains the wild card. If Intel succeeds in building a profitable foundry business—even at a fraction of TSMC’s scale—the upside could be substantial. If it fails, the company may remain mired in stagnation, with taxpayers absorbing part of the cost.

Verdict: Entry Zone and Investor Takeaways

For long-term investors, Intel represents a high-risk, high-reward opportunity. At a market capitalization of $125 billion, the stock already reflects the value of its core businesses. This implies that any meaningful success in the foundry initiative would translate into upside for shareholders.

However, the risks are considerable. Execution failures, intensifying competition, and political entanglements could derail the turnaround. Investors should view Intel as a speculative allocation within a diversified portfolio rather than a core holding.

Entry Zone: Investors seeking exposure may find value in the $22–$26 range, which offers downside protection based on legacy business profitability while preserving upside optionality tied to the foundry.

Key Takeaways:

1. Intel’s government-backed turnaround underscores the strategic importance of semiconductors in U.S. industrial policy.

2. The company’s current fundamentals are weak, but its core businesses provide a valuation floor.

3. Leadership under Lip-Bu Tan offers a credible pathway to reinvention.

4. The foundry is both the greatest risk and the greatest opportunity—potentially doubling Intel’s valuation if successful.

5. For investors, Intel remains speculative: not a clear growth story, but a turnaround bet with national-level tailwinds.