Intel (INTC.US) stock price soars, and it's hard to hide the losses in the foundry business, analysts bluntly say the possibility of profit is extremely low

The Zhitong Finance App learned that Intel (INTC.US) recently saw a sharp rise in stock prices due to a series of heavyweight cooperation and financing news, but the market is concerned about its core problem, the chip foundry business with huge losses, and has yet to be fundamentally solved. Despite support from Nvidia (NVDA.US), SoftBank Group, and US President Trump, investors still have doubts about Intel's future profitability.

Last week, Intel announced a new partnership agreement with Nvidia and will receive a $5 billion cash injection through the sale of shares. Boosted by this news, Intel's stock price continued to rise sharply. The cumulative increase this year has reached 48%, and the market value has increased by more than 50 billion US dollars.

The partnership was reached after the Trump administration announced an accelerated disbursement of the promised government funding of $8.9 billion. In addition, SoftBank also invested $2 billion in Intel. Analysts pointed out that while these funds undoubtedly enhanced Intel's cash flow strength, they did not solve its most critical capacity utilization problem.

Ivana Delevska, chief investment officer at Spear Invest, said: “What Intel needs most is for the foundry business to achieve strong and sustainable profitable growth, but that goal is still very far away.”

In the past four quarters, Intel's foundry division had revenue of nearly 18 billion US dollars, accounting for about one-third of the company's total revenue, but losses reached 13 billion US dollars, which was the biggest drag on the company's profits.

At last week's press conference, Nvidia CEO Hwang In-hoon said when asked if he would use Intel's foundry services, that this cooperation is mainly a “product collaboration,” and emphasized that Nvidia will continue to rely on TSMC.US as its main foundry partner while evaluating Intel's technology.

This attitude reflects the market's doubts about the future of Intel's foundry business. Citigroup analyst Christopher Danely downgraded Intel's rating from “neutral” to “sell” last week and bluntly stated that the “chances of success” in the generation business are “extremely low.”

According to analysts' estimates compiled by Bloomberg, Intel's adjusted net profit for 2025 is expected to be only 640 million US dollars, with revenue of 52 billion US dollars; net profit is expected to rise to 3.2 billion US dollars in 2026, with revenue of 54 billion US dollars. However, even if this target is achieved, the expected price-earnings ratio for the 2026 fiscal year will be as high as 43 times based on current stock prices, close to the level of the Internet bubble period.

If the stock price rises further to a peak of $50 at the end of 2023, the corresponding price-earnings ratio will skyrocket to more than 70 times. Nancy Tengler, CEO of Laffer Tengler Investments, stated, “In the absence of a sustainable, strong, and accelerated profit environment, the importance of valuation cannot be ignored. Intel's current overvaluation is difficult for investors to accept.”

Intel is under enormous pressure to spend capital. The company's capital expenditure is expected to reach 18 billion US dollars in 2025, and will remain around 15 billion US dollars in 2026, causing free cash flow to continue to be negative. “The capital and time required to build a foundry is huge, and there is still great uncertainty about whether it will be competitive enough in the end.” Tengler emphasized.

Meanwhile, Intel's strategic investor SoftBank Group's stock price also rose sharply in the Japanese market. Thanks to founder Sun Zhengyi's big bet on the field of artificial intelligence, SoftBank's stock price has soared 146% since the launch of the new fiscal year in April, becoming one of the strongest performing constituent stocks in the Eastern Stock Exchange Stock Price Index. Its index weight has doubled to 2%, second only to blue-chip companies such as Toyota Motor Corporation and Sony Group.