Will Intel’s Foundry Gamble Pay Off, With Help From Nvidia?

Consider this. We’re in the midst of a massive trade war, with the U.S. government pushing to bring manufacturing back onshore. At the same time, semiconductors have become the backbone of the modern U.S. economy, touching everything from AI to defense, with the government outlining it as a key area of national security while safeguarding American AI technology and intellectual property. With the largest domestic chipmaking footprint, Intel stock (NASDAQ:INTC) should be perfectly positioned to benefit from these big mega-trends. The company has been ahead of the curve, in a sense, investing $95 billion in capital spending to build out its foundry capacity over the last four years. And yet, the stock has been a clear laggard, down nearly 3% year-to-date and by 45% over the past 12 months. The markets don’t appear to have much confidence in Intel’s foundry operations, with the business losing nearly $13 billion last year. That said, a turnaround may not be far off, as Intel scales up production of its cutting-edge 18A process, while apparently being close to signing up Nvidia (NASDAQ:NVDA) as a foundry customer.

The Scaling Up Of The 18A Process

The Intel 3 process node has been in mass production for several months now and is used to make the Xeon 6 data center chips. Processors made using the latest Intel 18A process are being sampled with laptop manufacturers. Intel has talked up the 18A process in the past, indicating that it could help the company reclaim “process leadership,” which essentially means having the most advanced semiconductor manufacturing technology in the industry after years of falling behind foundry behemoths TSMC and Samsung Electronics. Intel’s process apparently has its advantages. While both the Intel 18A and TSMC’s competing N2 process have gate-all-around transistors, Intel’s fabrication process includes an additional innovation called backside power delivery, which touts improved efficiency and performance.  Customers are also seeing higher confidence in Intel’s process technology. Microsoft and Amazon have already contracted Intel to fabricate some of their custom chips, including AI accelerators, and this trend could pick up.

Could Intel Win Over Nvidia’s Business?

At present, most of Intel’s publicly announced foundry wins have come from non-traditional semiconductor players like Amazon, Microsoft, Tower Semiconductor, and MediaTek. That said, per UBS, there is a possibility that Nvidia could turn to Intel Foundry to manufacture its gaming GPUs. Winning over Nvidia, the world’s largest fabless chip designer, would mark a major milestone for Intel’s foundry efforts. Beyond the standard 18A node, Intel is also working on a performance-enhanced version dubbed 18A-P, which could appeal to customers looking to maximize performance or improve power efficiency. Much like how customers opt for enhanced variants of TSMC’s nodes, 18A-P could offer better yields, lower variability, and a more mature process. Other AI chipmakers, including Broadcom and AMD, have also expressed interest in Intel’s foundry services, although Nvidia appears to be further along in the evaluation process. It’s worth noting that current reports suggest Nvidia’s interest is limited to gaming GPUs and not its high-performance AI chips. Still, if Intel can get its foot in the door and demonstrate that its process technology is competitive, it could focus on producing AI chips as well for third parties.

The decrease in INTC stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 6% in 2021, -47% in 2022, 95% in 2023, and -60% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. So is this the right time to buy Intel stock?

Intel stock trades at under 18x estimated 2026 earnings, which is a reasonable multiple. To be sure, Intel’s declining earnings in recent years, loss of market share to AMD in the PC and server markets, and the broader pivot from CPUs to GPUs in the AI age do pose a risk for the stock. That said, if the foundry business does execute well on its latest 18A process and win over trophy customers like Nvidia, the stock could see a considerable upside. We value Intel stock at $25 per share, about 25% ahead of the current market price. See our analysis of Intel’s valuation for a closer look at what’s driving our price estimate for Intel.

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