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This Is the Best Reason to Invest in Intel Now. And It Might Be the Only One. | The Motley Fool

The Singular Case for Investing in Intel Stock Right Now

In the ever-evolving landscape of the semiconductor industry, Intel Corporation (NASDAQ: INTC) has long been a titan, but recent years have painted a picture of a company grappling with significant challenges. From manufacturing delays to fierce competition from rivals like Taiwan Semiconductor Manufacturing Company (TSMC) and Advanced Micro Devices (AMD), Intel's stock has underperformed the broader market, leaving many investors questioning its viability as a long-term holding. Yet, amid this backdrop of uncertainty, there emerges a compelling, albeit singular, reason to consider investing in Intel now. This reason isn't rooted in short-term hype or speculative AI booms but in a strategic pivot that could redefine the company's future: Intel's ambitious push into the foundry business, bolstered by substantial government support and a potential resurgence in domestic chip manufacturing.

To understand this rationale, it's essential to first contextualize Intel's current predicament. For decades, Intel dominated the CPU market, particularly in personal computers and data centers, thanks to its integrated design and manufacturing model. However, the rise of fabless companies—those that design chips but outsource production—has eroded Intel's edge. Competitors like AMD have leveraged TSMC's superior fabrication processes to produce more efficient, high-performance chips, while NVIDIA has capitalized on the AI revolution with its GPUs. Intel, meanwhile, has faced repeated setbacks with its own process nodes, such as the infamous delays in transitioning to 10nm and 7nm technologies. These missteps have not only cost market share but also investor confidence, with Intel's stock price languishing well below its peaks from the early 2000s.

Compounding these issues is the broader geopolitical tension surrounding semiconductor supply chains. The U.S.-China trade war and concerns over reliance on Taiwan for advanced chip production have highlighted vulnerabilities in global tech infrastructure. Enter the CHIPS and Science Act, a bipartisan piece of legislation signed into law in 2022, which allocates billions in subsidies to bolster domestic semiconductor manufacturing. Intel stands as one of the primary beneficiaries of this initiative, positioning it at the forefront of America's effort to reclaim leadership in chip production. This isn't just about financial handouts; it's about creating a moat that could insulate Intel from international disruptions and foster long-term growth.

The core of the investment thesis revolves around Intel's foundry services division, known as Intel Foundry Services (IFS). Unlike its traditional model where Intel primarily manufactures its own designs, IFS aims to become a full-fledged foundry, producing chips for third-party clients. This shift is monumental because it directly challenges TSMC's dominance, which controls over 50% of the global foundry market. Intel's CEO, Pat Gelsinger, has been vocal about this transformation, outlining a roadmap that includes aggressive investments in new fabs (fabrication plants) across the U.S., Europe, and Asia. Key projects include massive facilities in Arizona, Ohio, and Germany, with the Ohio site alone representing a $20 billion investment aimed at producing chips on Intel's advanced 18A process node by 2025.

What makes this particularly intriguing is the influx of government funding. Under the CHIPS Act, Intel has secured up to $8.5 billion in direct grants, plus an additional $11 billion in low-interest loans and tax incentives. This capital injection is designed to accelerate the build-out of these fabs, reducing the financial burden on Intel and potentially speeding up its technological catch-up. Moreover, the Act includes provisions for research and development, which could help Intel refine its processes and attract high-profile clients. Already, Intel has inked deals with companies like Microsoft, which plans to use Intel's 18A process for custom chips, signaling early validation of the foundry strategy.

Skeptics might argue that Intel's foundry ambitions are fraught with risks. After all, TSMC has a decades-long head start, with proven yields and a vast ecosystem of partners. Intel's history of execution failures raises doubts about its ability to deliver on promises. For instance, the company's 7nm node, now rebranded as Intel 4, arrived years behind schedule, allowing competitors to pull ahead in areas like AI accelerators and mobile processors. Additionally, the foundry business requires not just technical prowess but also a cultural shift—from a vertically integrated giant to a customer-focused service provider. Early reports suggest Intel is making strides, with Gelsinger restructuring the company to separate its design and manufacturing arms, but the transition won't be seamless.

Despite these hurdles, the singular reason to invest boils down to valuation and asymmetric upside. At current prices, Intel trades at a forward price-to-earnings ratio that's significantly lower than peers like NVIDIA or even AMD, reflecting the market's pessimism. This discounted valuation embeds a lot of the downside risks, meaning that if the foundry bet pays off—even partially—the stock could see substantial appreciation. Imagine a scenario where Intel captures just 10-15% of the global foundry market over the next decade; that could translate to billions in additional revenue, diversifying away from its cyclical PC business. Furthermore, the geopolitical tailwinds are undeniable. As governments worldwide prioritize semiconductor sovereignty, Intel's U.S.-centric approach could lead to more contracts, partnerships, and protections that foreign competitors lack.

Let's delve deeper into the technological roadmap that underpins this optimism. Intel's 18A process, expected to enter high-volume manufacturing in 2025, incorporates cutting-edge features like backside power delivery and ribbonFET transistors, which promise superior performance and efficiency compared to current nodes. If successful, this could not only revive Intel's own product lineup—think next-gen Xeon processors for data centers—but also lure fabless designers seeking alternatives to TSMC. The company is also investing heavily in extreme ultraviolet (EUV) lithography tools from ASML, aiming to close the gap with industry leaders.

Beyond the foundry, Intel's broader ecosystem plays a supporting role. Its x86 architecture remains a standard in enterprise computing, and initiatives like the OpenVINO toolkit for AI development could position it as a player in the edge computing space. However, these are secondary to the foundry pivot; without success there, Intel risks becoming a legacy player in a rapidly advancing field.

Investors should also consider the macroeconomic environment. The semiconductor industry is notoriously cyclical, with booms driven by demand for PCs, smartphones, and now AI infrastructure. While the current AI hype has favored NVIDIA, Intel's Gaudi accelerators and Habana Labs acquisition show it's not sitting idle. Yet, the real differentiator is the structural shift toward onshoring. With tensions in the Taiwan Strait and supply chain disruptions from events like the COVID-19 pandemic, companies and governments are increasingly looking to diversify manufacturing. Intel, with its expanding U.S. footprint, is perfectly aligned with this trend.

Of course, no investment is without caveats. Intel's debt load has increased to fund these expansions, and any delays in fab construction or process yields could lead to further stock declines. The company has also faced leadership churn and cultural challenges, which Gelsinger is addressing through aggressive hiring and R&D spending—projected at over $15 billion annually. Competition isn't static either; TSMC is building its own U.S. fabs, and Samsung is vying for market share.

In conclusion, while Intel faces a multitude of headwinds that make it a risky bet for conservative investors, there's one overriding reason to take a position: its foundry transformation, supercharged by CHIPS Act funding and geopolitical necessities. This isn't a quick flip; it's a multi-year thesis that hinges on execution. For those with a high risk tolerance and a belief in American innovation, Intel represents a contrarian opportunity in an industry where fortunes can turn on technological breakthroughs. As the world races toward an AI-driven future, Intel's bet on becoming a foundry powerhouse could be the catalyst that revives its fortunes—or at least provides a hedge against over-reliance on foreign chipmakers. Time will tell if this singular reason proves prescient, but for now, it's the beacon amid Intel's stormy seas.

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Read the Full The Motley Fool Article at:
[ https://www.fool.com/investing/2025/07/30/theres-only-1-reason-to-invest-in-intel-now/ ]