Intel's Stock Rally Clashes with Foundry's Crippling Losses, Exposing Turnaround Risks

What happened

A recent Motley Fool article questions whether Intel's stock surge has overshot CEO Lip-Bu Tan's turnaround plans, focusing on the company's bet on AI chip foundry success. DeepValue's report reveals that Intel Foundry generated a mere $307 million in external revenue in 2025 against a staggering $10.3 billion operating loss, underscoring severe financial strain. Despite strategic equity injections from sponsors like Nvidia and government backing, the foundry remains largely internal and unprofitable, with minimal external customer traction. The report stresses that without concrete proof points—such as server CPU supply normalization by Q2 2026 and a named external 18A commercial agreement—the investment case deteriorates rapidly. This highlights a critical disconnect between market optimism fueled by AI narratives and the harsh operational realities documented in Intel's filings.

Implication

Intel's valuation now hinges on external foundry adoption, but with only $307 million in external revenue and massive losses, this expectation appears overly optimistic. Near-term catalysts, including securing a commercial 18A wafer deal or easing supply bottlenecks, are essential to sustain the rally but remain unproven. Without these milestones, downside risks escalate due to the $105.4 billion PP&E base and potential impairments if node plans are paused. Strategic sponsors provide financial runway but do not ensure foundry customer conversion, leaving core profitability issues unresolved. Investors should closely monitor Q2 2026 results for evidence of progress, but brace for volatility if execution fails to meet lofty expectations.

Thesis delta

The DeepValue report's 'POTENTIAL SELL' rating, predicated on the need for operational proof points, is reinforced by the article's warning of stock overextension. No fundamental shift occurs; instead, the analysis confirms that market enthusiasm has outpaced Intel's ability to monetize its foundry strategy, heightening the urgency for observable progress. Investors should maintain a skeptical stance until tangible evidence emerges.