Intel's Stock Rally Faces Scrutiny as Deep Losses and High Leverage Undermine Turnaround Narrative

What happened

A Seeking Alpha article promotes Intel's 'comeback of a lifetime,' citing Q3 results that exceeded expectations and a ~60% stock rally since September, driven by momentum in client computing and foundry businesses from new CPU launches and partnerships like Nvidia. However, DeepValue's master report reveals that Intel's stock has surged ~84% over 12 months, embedding optimistic turnaround assumptions while fundamentals remain fragile, with a DCF implying no intrinsic value support. The report highlights Intel Foundry's deep operating losses—$13.4 billion in 2024 and $7.8 billion year-to-date in 2025—along with high leverage, negative interest coverage, and suspended dividends under CHIPS covenants. Despite the positive news, Intel's valuation metrics are stretched, with P/E around 919x and EV/EBITDA ~177x, reflecting minimal current earnings and significant execution risks. Investors must look beyond the propaganda to assess whether recent gains are sustainable against ongoing financial weaknesses and intense competition from TSMC and AMD.

Implication

The bullish news may attract short-term momentum, but value investors must recognize that Intel's stock is priced for perfection despite continued losses and leverage, limiting margin of safety. Intel's foundry business remains a significant drag, with no clear path to profitability yet, and any delay in securing external customers could lead to further impairments. High net debt/EBITDA of ~34.7x and negative free cash flow constrain financial flexibility, increasing vulnerability to macroeconomic headwinds or competitive pressures. While AI tailwinds and government support offer upside potential, the current price demands flawless execution, making new capital unattractive until concrete improvements in earnings and cash flow emerge. Existing holders should consider trimming positions unless upcoming milestones, such as 18A foundry wins, de-risk the story more convincingly.

Thesis delta

The DeepValue report maintains a 'POTENTIAL SELL' stance, arguing that Intel's equity is overvalued given its fragile fundamentals and high execution risks. The recent optimistic article and stock rally do not shift this thesis, as they reflect sentiment-driven optimism rather than substantive financial improvement or reduced competitive threats. Investors should remain skeptical until Intel demonstrates sustained progress in shrinking foundry losses, stabilizing core products, and achieving positive free cash flow to support its valuation.