The earnings report released this week by Intel represents a pivotal moment for the silicon giant that once defined the computing era. For years, Intel has struggled to keep pace with smaller, nimbler competitors and the manufacturing prowess of Taiwan’s TSMC. To fix this, CEO Pat Gelsinger has split the company into two: a “Product” side that designs chips and a “Foundry” side that builds them. This shift is designed to transform Intel from a struggling chipmaker into a world-class factory for the entire world’s AI needs, but building those factories is proving to be incredibly expensive.
The financial weight of this transition was clear in the latest SEC filing, which showed the Intel Foundry unit alone suffered a $2.4 billion operating loss for the quarter. However, revenue for that segment rose 16% year-over-year to $5.4 billion. This is the core of the Intel investment thesis: can the company survive these massive losses long enough to reach “node leadership”—the technical term for making the smallest, fastest transistors on the planet.
Investors are specifically looking at the “18A” process node, Intel’s next-generation manufacturing technology. Intel confirmed this week that 18A is on track for high-volume production by 2025. This matters because it marks the point where Intel expects to stop paying competitors to make its chips and start taking orders from other tech giants instead. Furthermore, the company is starting to see the benefits of the U.S. CHIPS Act, which is injecting billions in government funding to bring semiconductor manufacturing back to American soil.
The immediate risk for the market is whether the “AI PC” cycle and data center demand can bridge the gap. Intel’s Data Center and AI revenue grew 22%, driven by its Gaudi 3 accelerators, which are marketed as a cheaper alternative to Nvidia’s dominant hardware. However, the roadmap is still long. To stay confident, watch for the official launch of the first 18A products later this year and any updates on external customer wins for the Foundry business. If big-name designers start ditching TSMC for Intel, the current losses will look like a bargain.
The Street Editor’s Take:
I think the market’s positive reaction to a $3.7 billion loss shows that the “death of Intel” narrative is officially over. My read is that the transition to a standalone Foundry model is working exactly as intended: it’s exposing the high costs, but also the massive potential for Intel to become the Western alternative to TSMC. I see the heavy government backing as a safety net that most other tech stocks simply don’t have. If they hit their 2025 manufacturing milestones, today’s price will look like a steal.
Not financial advice. Always do your own research before making investment decisions.
