Former Intel CEO Gelsinger Warns of Prolonged US Chip Comeback, Reinforcing DeepValue's Foundry Risk Assessment

What happened

Intel is navigating a high-risk turnaround under CEO Lip-Bu Tan, aiming to revive its foundry business and restore process leadership after years of losses and competitive setbacks. Former CEO Pat Gelsinger recently warned that the United States still faces a long road to bring advanced chip manufacturing back from Asia, tempering optimism around recent milestones like CHIPS Act funding. This caution aligns with DeepValue's analysis, which details Intel Foundry's operating losses exceeding $10 billion annually and minimal external revenue, underscoring deep challenges in attracting third-party customers. Execution on critical nodes like 18A for products such as Panther Lake and Clearwater Forest remains fraught with risk, with the report highlighting potential delays or failures that could trigger further impairments. Gelsinger's remarks thus emphasize the geopolitical and operational hurdles that complicate Intel's path to becoming a competitive foundry, echoing the cautious stance in DeepValue's potential sell rating.

Implication

Gelsinger's warning adds external credibility to DeepValue's assessment of Intel's foundry challenges, suggesting that even insiders see significant obstacles ahead, which could dampen market optimism. This aligns with the report's potential sell rating and bear case, where foundry losses persist and external revenue stays minimal, threatening consolidated margins. Key near-term catalysts, such as Panther Lake adoption and 18A execution, now carry heightened scrutiny, with any slippage likely to exacerbate investor skepticism and stock volatility. With Intel trading at 964x trailing EPS and EV/EBITDA of 184, the valuation offers little cushion for setbacks, making the stock vulnerable to negative news or operational delays. Therefore, investors should adhere to DeepValue's guidance to trim above $48, monitor foundry customer announcements closely, and wait for sustained profitability before considering entry points.

Thesis delta

Gelsinger's warning does not materially shift the investment thesis but strengthens the case for caution by highlighting that geopolitical and execution challenges could extend the timeline for foundry profitability. It underscores DeepValue's view that Intel's turnaround is high-risk and dependent on successful node execution and external customer wins, with failure risks aligned with the bear scenario. Investors should thus prioritize monitoring the 90-day checkpoints, such as free cash flow trends and Panther Lake reviews, to gauge if Intel can overcome these warnings.