Intel’s actions are on the rise after the company got a series of high profile sponsors, But cash injections have done little to solve the company’s biggest problem: its chips manufacturing operations, which generate losses.
The company’s new alliance with Nvidia Corp. triggered Intel’s shares last week, raising this year’s progress to 48%, an action that added more than US $ 50,000 million to market value. The agreement, which will contribute US $ 5,000 million to Intel coffers through the sale of shares, follows the plan of US President Donald Trump to accelerate the payment of US $ 8.9 billion in financing already compromised with Intel and an investment of US $ 2 billion of SoftBank Group Corp.
But what these agreements fail to provide is a large client that can make Intel chips plants operate almost at full capacity. The shares rose 0.4% on Monday. “What is needed is that the foundry sector achieves a solid and lasting benefit growth”, Ivana DelEvska, Spear Invest investment director, whose ETF Badge has more than US $ 110 million in assets. “It is extremely premature in this case.”
Despite representing approximately one third of Intel’s income in the last 12 months, its foundry business has been largely an operation with losses. While the division generated almost US $ 18,000 million in revenues in the last four quarters, Intel has lost more than US $ 13,000 million in those sales.
When asked if Nvidia will use Intel’s foundry services at a press conference on investment, the executive director of Nvidia, Jensen Huang, He presented the agreement as a unit of products and said he would continue to be a customer of Taiwan semiconductor manufacturing Co. while evaluating Intel’s technology.
Wall Street profitability projections for 2025 and 2026 have barely modified in the last month, according to the average estimates of analysts collected by Bloomberg. Intel is projected to obtain a adjusted net profit of US $ 640 million on revenues of US $ 52,000 million in 2025, followed by $ 3.2 billion over sales of US $ 54,000 million in 2026.
Without an improvement in perspectives, the assessment of Intel, which is already at points of the Puntocom, continues to be more expensive. If the price of your shares remains unchanged with respect to its current level of almost US $ 30, it would quote your profits at approximately 43 times at the end of fiscal year 2026, according to the forecasts of current benefits of analysts. That figure would be reduced to approximately 24 times its profits if the price of its shares also remained unchanged during fiscal year 2027.
However, if the price of Intel shares changes or their real profits differ from current estimates, that figure could change dramatically. In a scenario in which the analysts of the analysts for the profits of the fiscal year 2026 and the price of their shares rise to US $ 50, approximately the maximum reached at the end of 2023, the per of the last 12 months of Intel would shoot more than 70. This makes it very difficult for investors to justify the purchase of shares at its current price, despite the fact that Intel now has Nvidia, SoftBank and Trump side.
Last week, Citigroup Inc., Christopher Danely analyst, He reduced Intel’s recommendation from Neutral to sell due to high assessments, adding that his foundry business “has minimal chances of success.”
“There are times when it can be said that the valuation does not matter, but that usually happens when one is in an environment with a growth of sustainable, solid and accelerated profits, and that is not what we have in Intel”Said Nancy Tengler, executive director of Laffer Tengler Investments, which manages US $ 1.6 billion.
The problem is that Intel’s capital expenses will be approximately US $ 18,000 million this year and 15 billion dollars the following year, which is pushing its free cash flow towards negative territory. “The amount of money and the time it requires to build a foundry are huge,” said Tengler, adding that there would also be doubts about his competitiveness. “Many things would have to go well.”
The growing weight of SoftBank Group Corp. in the Japanese stock stock reference index is even promoting its skeptics to buy shares. The bets of its founder, Masayoshi are, by artificial intelligence they have promoted a 146% increase in the shares since the fiscal year began in April, making it one of the best performance of the Topix, at the close of its last year. SoftBank’s weight in the indicator has doubled up to 2% during the period, just behind frontline companies such as Toyota Motor Corp. and Sony Group Corp.
