Intel (INTC): The comeback trade hiding inside America’s semiconductor crisis
Everyone thinks Intel is a fading CPU company. It’s not. It’s a bet on whether the West can manufacture advanced semiconductors independently of Taiwan—backed by $8.5 billion in direct government funding, a foundry strategy that didn’t exist four years ago, and a process node roadmap that could match TSMC by 2025. The company is burning cash, cutting thousands of jobs, and losing the AI training race to Nvidia. And yet: Intel is the only company on Earth trying to simultaneously design leading chips, manufacture them domestically, and sell foundry services to competitors. That combination is either the most audacious turnaround in semiconductor history or the most expensive failure. Here’s why the answer hinges on three sentences in Intel’s next earnings call—not the headline numbers.
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The full-stack chipmaker, explained 🧩
Intel doesn’t make most of its money from a single product anymore. It makes money across five distinct semiconductor businesses—each with different growth trajectories, margin profiles, and competitive dynamics.
Client Computing remains the largest segment—laptop and desktop CPUs that powered computing for decades. But PC volumes declined sharply in 2023 before stabilising in 2024, and the segment faces structural headwinds as cloud computing reduces PC dependency. Margins are still relatively strong, but growth has stalled.
Data Centre & AI was once Intel’s growth jewel,l but has faced brutal competition. Intel’s Xeon server chips still dominate traditional workloads, but AMD’s EPYC processors have grabbed meaningful market share, while Nvidia’s GPUs captured the AI training market almost entirely. Intel’s Gaudi AI accelerators launched as a response, targeting inference workloads at lower price points. CoreWeave’s rise underscores the problem: hyperscalers are buying Nvidia, not Intel, for AI infrastructure.
Intel Foundry Services is the transformational bet. Formally launched in 2021, IFS aims to turn Intel into a contract chip manufacturer for third-party U.S. customers. The US government is backing this with $8.5 billion in CHIPS Act direct funding (plus additional loans and tax credits), viewing Intel as strategically vital for domestic semiconductor supply. Intel is building fabs in Arizona, Ohio, and Germany. The economics are gruelling: foundry margins typically run 20–30% versus Intel’s historical 60%+. But if Intel hits its 18A process node targets—potentially matching TSMC’s 3nm class—it could attract major fabless customers.
Network & Edge covers networking chips, FPGAs (via the Altera unit), and edge computing products. Growth here is modest but steady, driven by 5G infrastructure and IoT deployments.
Mobileye, Intel’s majority-owned autonomous-driving subsidiary, generates about $2 billion annually by selling advanced driver-assistance systems to 50+ automakers. It holds leadership in camera-based systems, though Tesla’s in-house approach and Nvidia’s DRIVE platform pose competitive threats.
In other words, “Intel” is now a diversified semiconductor conglomerate trying to own the full stack—design, manufacturing, and AI acceleration—not just the CPU incumbent clinging to legacy markets.
Altera and programmable chips: The quiet growth engine 🕵️♀️
One of Intel’s most defensible franchises sits far from the CPU and GPU headlines: field-programmable gate arrays (FPGAs).
Intel acquired Altera in 2015 for $16.7 billion, then attempted to integrate it—a decision that fully stifled growth. In 2024, Intel spun Altera back into a standalone business unit, taking investment from external partners. FPGAs are reprogrammable chips used in telecom infrastructure, aerospace, and AI inference acceleration. Altera competes primarily with AMD’s Xilinx division. The FPGA market is growing at an estimated 8–10% annually, driven by 5G base stations and edge AI applications where flexibility matters more than raw performance.
Defence and aerospace: Altera holds significant design wins in military systems, where supply chain security and U.S.-based manufacturing matter. Intel’s Ohio fabs will produce Altera FPGAs domestically—a key selling point for defence contractors. This segment generates roughly $2 billion annually with approximately 35% gross margins—lower than historical Intel levels but higher than foundry economics.
“Programmable acceleration” positioning: Intel frames Altera as complementary to its CPU and accelerator lines, enabling customers to optimise workloads with tailored logic. In data centres, FPGAs accelerate tasks like video transcoding, financial modelling, and network packet processing—niches where GPUs are overkill.
This segment is profitable, defensible, and tied to secular growth in 5G and edge computing—very different economics from the capital-intensive foundry bet. For Amazon, it was advertising hiding inside e-commerce. For Intel, Altera could be the stable-margin engine hiding amid the turnaround chaos.
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