Intel Foundry Faces Critical Test After Stock Falls 45% in October

As Intel After experiencing the biggest drop in its shares since the 1970s due to a deteriorating outlook for the PC market, the chipmaker is facing increasing pressure to get its struggling foundry business off the ground.

This has been an elusive task for Intel. The company has spent half a decade, and much of its $108 billion in capital spending over that time, trying to challenge Taiwan Semiconductor Manufacturing Co. But it still doesn’t have a big-name customer for its most advanced chips and mainly makes chips for its own products.

Wall Street is losing patience. After the U.S. government took a 10% stake in Intel in August 2025, followed by Nvidia with a $5 billion investment, the stock began to skyrocket, eventually rising sixfold in 10 months before peaking in June. Intel was finally finding its place in the artificial intelligence boom, providing central processors used for agentic AI, while optimism simultaneously grew about its fabulous aspirations.

Intel’s story took a dramatic turn for the worse on Thursday, when the company said this quarter’s revenue would be $1 billion to $2 billion below analyst estimates as the PC market continued to suffer from soaring costs of memory and other components. Intel still relies on its PC segment for about half of its revenue, and consumers are increasingly choosing not to upgrade.

The stock fell 29% on Friday, its worst day since the 1970s, capping a 45% fall in October, the biggest monthly decline on record, according to FactSet. It is still down 8% in Monday trading.

Intel’s investments in the future should bear fruit. CEO Lip-Bu Tan said he expects the global server processor market to grow fivefold over the next five years, to around $200 billion. Intel’s data center business grew 78% in the third quarter from a year earlier, reaching $7.3 billion.

However, Intel said it could not make enough chips to meet demand, pointing to the industry’s supply constraints on wafers, substrates and memory, many of the same factors hurting PC sales.

This forces Tan to make difficult choices. In response to the capacity shortage, Intel said it was eliminating some capacity at its Oregon factories. to make wafers for its advanced 18A chips to make more wafers on an older node, known as the Intel 3, used for its data center products.

Intel relies on 18A to attract external foundry customers, so the shift in resources could complicate that effort. David Yoffie, a Harvard Business School professor who spent nearly three decades on Intel’s board, said the latest measures are hardly welcoming to potential foundry customers.

“They’re concerned that if Intel doesn’t have excess capacity beyond its own demand, they’re just not a very credible supplier,” Yoffie said. If it doesn’t find a large-scale foundry customer within a year, “then the strain on Intel’s economic situation will begin to manifest itself in even more dramatic ways,” he said.

An Intel spokesperson said in a statement that “customer trust in Intel Foundry is built on execution.”

“We are on track with our technology roadmap, demonstrating strong performance with 18A and progress with 14A,” the spokesperson said, referring to the company’s upcoming chips. “We continue to see strong engagement with clients and remain focused on driving their business success through consistent execution. »

Intel is best known for its industry-leading central processing units, or CPUs. Graphics processing units Nvidia And Advanced microdevices dominated the early AI boom because they excel at handling large workloads for training models and inference for chatbots, while processors like Intel’s are crucial for running the virtual machines used by agentic applications like MetaThe muse.

Competitor or partner?

As one of the only companies in the world that can make and package the advanced chips it needs for its own products, Intel has “more control over its destiny” than most chipmakers, Jordan Klein, an analyst at Mizuho Securities, said in an interview.

“If you don’t have enough capacity, you’re leaving revenue and money on the table,” Klein said.

Former Intel CEO Pat Gelsinger, who was ousted at the end of 2024, spent his four years at the company aggressively pursuing investments in foundries to catch up on its 7- and 10-nanometer technologies, advanced process nodes that aim to fit more transistors on each chip.

Tan took a more cautious approach, limiting spending until customer demand was locked in. He said Thursday that “a few customers” would be announced over the next two quarters.

Intel’s 18A chips, intended for its own use, are produced in large quantities in Arizona, and a second factory is in the works. A first structural truss has just been installed at Intel’s new facility in Ohio, although the project is nearly five years behind schedule.

Another obstacle to acquiring new customers, Yoffie said, is that chipmakers like Broadcom And Qualcomm may be hesitant to make chips at a company that also competes on the product side.

“The right solution is for Intel to divest itself of the foundry business,” Yoffie said, calling it “not only the best solution, but perhaps the only solution.”

Klein said AMD is likely the only major chipmaker not interested in manufacturing at Intel because the two companies compete directly in the processor market. He called it a “problem of competition, secrecy and confidentiality.”

AMD reports its third quarter results after the bell on Tuesday.

Yoffie said the United States needs Intel to succeed.

“Ultimately, TSMC will only be able to create 20-25% of its global capacity in the United States and that will take several more years,” he said. “If we don’t have a U.S. foundry and we have a number of geopolitical issues, supply chain issues like we had under Covid, that’s going to be bad for the country and bad for the U.S. semiconductor industry.”

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