Stock price nearly doubles as the market bets on Intel's "comeback"

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The capital market is once again embracing Intel, driving its stock price to nearly double within the year. Catalyzed by massive external funding and a brief rebound in performance, investors seem to be betting that this chip giant is "too important to fail."

According to a previous article by Wallstreetcn, Intel announced a better-than-expected Q3 earnings report, turning a net profit and ending six consecutive quarters of losses—the company’s longest losing streak in 35 years. Boosted by this, the stock rose about 7.7% in after-hours trading. So far this year, Intel has gained nearly 90%.

This wave of optimism was triggered in August. In less than three months, Intel received nearly $16 billion in funding from the US government, Nvidia, and Japan’s SoftBank Group. Although these investments diluted some equity, they bought valuable time for Intel's transformation and became the key fuel driving its stock surge.

However, for investors, the real test is whether this capital can help Intel solve its fundamental problems. It must prove not only that it can survive but also that it can effectively compete with industry leader TSMC in advanced chip manufacturing. For now, there is still a huge gap between market expectations and corporate reality.

Massive Investment and Performance Rebound

Intel’s stock price has risen more than 90% year to date, most of which occurred after August. At that time, the US government announced it would provide Intel with $8.9 billion in grants, converting them to equity. Soon after, former competitor Nvidia announced a $5 billion investment and established a close chip development partnership, while Japan’s SoftBank Group invested $2 billion.

Supported by strong capital, Intel released a third-quarter earnings report showing a return to profitability. The report showed better-than-expected revenue and a net profit of $4.1 billion, fully reversing a net loss of $16.6 billion in the same period last year. However, experts believe that the performance rebound benefited more from the AI boom and the overall expansion of data centers. Since GPU clusters still require CPU servers for coordination, traditional server demand rose in tandem; this improvement in external conditions might not be due to fundamental improvements in Intel's own competitiveness.

Realistic Challenges in the Race for Technology

Intel has recently made some progress in chip manufacturing processes. Its most advanced 18A process-based PC chips have begun shipping and are expected to be launched widely in January next year, with data center versions scheduled for release in the first half of next year. This timing is critical, as the 18A process is roughly comparable to TSMC’s cutting-edge N2 process, which is expected to enter mass production at the end of this quarter.

But this does not mean Intel has caught up. Firstly, the 18A process is currently used only for Intel-designed chips, not for contract manufacturing for external customers like Apple or Nvidia. This does not prove its foundry business can compete with TSMC. Secondly, the real-world performance of these new chips and how they directly compare with TSMC products remain unknown.

Even more important is manufacturing economics. Intel’s CFO David Zinsner admitted that although chip yields are improving "predictably," they "have not yet reached the level needed to drive proper profit margins" and expects it will take a whole year to reach this goal. If yields are too low, Intel’s profit margins will be severely squeezed.

Heavy Challenges for Foundry Business

As the core of transformation, Intel’s foundry business is closely watched by investors, but its outlook remains uncertain. This business is projected to need about $100 billion in capital investment, yet it has not secured any major external customers thus far.

The management’s attitudes have fueled outside doubts. Intel CEO Lip-Bu Tan has clearly stated that the company will not invest in next-generation 14A process technology unless there is meaningful external customer demand. He reiterated that Intel will not expand production capacity without clear demand. This lack of confidence could deter potential clients: choosing a chip foundry requires huge time and engineering investment, and if the supplier stops offering cutting-edge technology, those investments will be wasted.

Analysis suggests Intel has not made organizational changes necessary for the foundry business’s development. The company continues to resist splitting manufacturing from chip design, a step seen as key to removing obstacles to its foundry growth.

Investor Bets and Market Risks

Ultimately, the current market sentiment rests on a belief: due to its importance to national security and the US high-tech economy, Intel is "too important to fail." Yet this belief does not automatically translate to success. What Intel needs most now may be something out of its control—a technical misstep by main competitor TSMC. That seems unlikely.

Meanwhile, some market voices are warning investors about volatility risks for individual stocks. Recently, the gap between the VIX EQ index, which measures single-stock volatility, and the VIX index, measuring overall market volatility, hit an all-time high, reflecting market jitters over certain tech stocks. For Intel, investor patience and funding have bought it time, but to truly revive, it needs thorough internal transformation—and a bit of luck.

Risk Warning and DisclaimerThe market has risks; investment needs caution. This article does not constitute personal investment advice and does not take into account individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. If you invest based on this, you are solely responsible. ```