For decades, Intel (INTC) was the crown jewel of the tech industry. It dominated the CPU market, generated tens of billions in annual profits, and was a dividend favorite for income investors. But over the past 10 years, Intel has fallen from glory, trying to compete in the era of AI-powered semiconductors, dominated by Nvidia (NVDA), Advanced Micro Devices (AMD), and Taiwan Semiconductor Manufacturing Company (TSMC) (TSM).
In an unexpected turn of events, Washington has made a strategic investment that has the potential to reshape the relationship between the US government and the technology industry and return Intel to glory. The rush of cash, coupled with the company’s aggressive attempt to change its story, has sent its shares up 84.7% so far this year, compared to the S&P 500 Index ($SPX)’s 13.1% gain.
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On August 22, Intel and President Donald Trump’s administration reached an agreement under which the US government will invest $8.9 billion in Intel common stock, representing a nearly 10% stake in the company. It also includes a five-year guarantee that allows the government to take an additional 5% stake, but only if Intel loses majority control of its foundry business. Funding will be allocated from CHIPS and Science Act grants and funding from the Secure Enclave program.
Washington’s political and investment support for Intel is a strategic partnership to ensure that the United States regains control of the world’s most important technology: semiconductors. Advanced chips are the backbone of everything from smartphones and cloud computing to artificial intelligence systems and military defense. Intel remains the only American company capable of producing advanced semiconductors at scale on American soil, which is probably why Washington chose Intel. Washington’s interest in Intel could also be due to its next-generation foundry strategy. Domestic chip production is now a national priority, and Intel’s ability to deliver cutting-edge nodes on U.S. soil provides the government with a secure and reliable source of advanced semiconductors.
In August, Intel also secured a $2 billion investment from SoftBank Group (SFTBY). Under the leadership of CEO Lip-Bu Tan, Intel has taken important steps to restore its engineering culture and financial health. Tan has focused on operational discipline, product excellence and commitment to industry partners to regain Intel’s long-lost competitive advantage.
The company’s turnaround efforts were evident in its most recent second quarter. Intel generated $12.9 billion in revenue, exceeding expectations and showing strong execution across its core businesses.
Intel’s foundry revenue hit $4.4 billion in the second quarter, down slightly sequentially but above forecasts due to strong Intel 7 wafer production and increased advanced packaging services. Importantly, the Intel 18A has begun manufacturing in Arizona, ahead of the fourth quarter launch of Intel’s new client processor, Panther Lake. The company has begun to impose financial discipline after years of heavy spending and poor performance. In the second quarter, Intel incurred $800 million in non-cash impairment and accelerated depreciation charges, along with $200 million in one-time costs, which affected profitability. Leaving aside these one-time charges, adjusted gross margin was 37.5% and EPS was $0.10, both of which exceeded expectations. The company aims to meet its operating expense targets of $17 billion and $16 billion in 2025 and 2026, respectively, which are important milestones in returning to profitability.
The company still has a solid $21.2 billion in cash and short-term investments, giving it the flexibility to continue deleveraging as operations improve. Intel’s outlook for the third quarter reflects a combination of caution and confidence. The company forecasts revenue of between $12.6 billion and $13.6 billion, a gross margin of around 36% and earnings per share (EPS) adjusted to breakeven. Analysts estimate the company will earn $0.12 per share this year, which could rise to $0.64 in 2026.
Overall, Wall Street rates INTC stock a “Hold.” Of the 41 analysts covering the stock, two rate it as a “Strong Buy”, 34 rate it as a “Hold” and five suggest a “Strong Sell”. The stock has surpassed its average price target of $26.27. However, the Street’s highest estimate of $43 suggests the stock has 16% upside potential over the next 12 months.
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With Nvidia and AMD taking aggressive steps, Intel may not look like the clear winner today. It has fallen behind rivals, struggled with leadership and missed much of the AI ​​boom. His recovery story is far from over, but his trajectory is changing. Washington’s investment signals a long-term bet on US technological self-sufficiency, which could help Intel strengthen its position in this heated AI race.
On the date of publication, Sushree Mohanty had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
