Intel's Stock Sinks After a Disappointing Outlook. The Chipmaker Has a Supply Problem

What happened

Intel's stock price declined following a disappointing outlook that exposed supply constraints, challenging the recent rally driven by AI optimism and strategic investments. This news aligns with the DeepValue report's warning that Intel's valuation is inflated relative to weak fundamentals, including negative trailing EPS of -$4.38 and an EV/EBITDA of ~245x. The report highlights Intel Foundry's operating losses near -60% margin and minimal external revenue of ~$85M year-to-date, indicating that supply issues may stem from deeper operational inefficiencies in its capital-intensive turnaround. Despite liquidity from government and partner stakes, the foundry segment's slow progress and competitive pressures from AMD, with ~27% server unit share, underscore execution risks. The disappointing outlook suggests Intel's narrative of a rapid foundry and AI-driven recovery is facing headwinds, reinforcing skepticism about its ability to meet market expectations.

Implication

Intel's disappointing outlook and supply issues indicate that operational challenges are hindering its ability to leverage AI demand, a key driver of the recent stock surge. The DeepValue report shows Intel Foundry remains a significant drag with minimal external revenue and deep losses, undermining the turnaround story. High valuation multiples, such as a P/E of 1240.4, are unsustainable without rapid improvement in fundamentals like foundry margins and competitive positioning against AMD. External foundry revenue needs to exceed $1B with better margins by mid-2027 to justify upside, but current trends suggest slower progress. Therefore, investors should wait for a price reset towards $40 or clear evidence of execution, such as meaningful external foundry wins, before reassessing exposure.

Thesis delta

The news of a disappointing outlook and supply problem shifts the investment thesis towards a more bearish stance, indicating that Intel's execution is lagging behind optimistic market expectations. It reinforces the DeepValue report's 'POTENTIAL SELL' rating by highlighting operational weaknesses that could delay foundry profitability and exacerbate valuation risks. Investors should now place greater emphasis on monitoring supply chain improvements and external foundry revenue growth as critical proof points for any recovery.