Intel Faces a Tipping Point: Foundry Losses and Server Weakness Test the Market’s Faith in the Turnaround

Intel’s blistering rally has run into its first serious headwind, and investors are being forced to re-evaluate just how much of the turnaround story is already baked into the price. A sharp weekly drop of 14.42% has erased some of the euphoria, with the stock sliding from its early-May highs near €110 to €94 in Monday trading. The selloff comes as fresh scrutiny from UBS and a wave of short-selling activity highlight two persistent chinks in the chipmaker’s armor: mounting losses at its foundry business and continued erosion in the lucrative server-chip market.

At the heart of the pessimism is Intel Foundry, which posted an operating loss of $2.4 billion on revenue of $5.4 billion in the most recent quarter. That red ink is not a peripheral issue — it is a direct drag on earnings that the rest of the company must absorb. Much of the loss is tied to the costly ramp of the Intel 18A process, where technical progress has been real but the economics remain punishing. With the company spending heavily to bring new wafers into production, the market is sending a clear signal: the path to profitability for the foundry unit is still hazy.

Short sellers, who were caught off guard as the stock more than tripled from its March low, are now piling back in. According to S3 Partners, while bears suffered paper losses of more than $12 billion during the rally, short interest has crept back up to near last year’s highs. That leaves Intel’s shares unusually vulnerable to the kind of sharp, momentum-driven reversals that occur when profit-taking collides with aggressive positioning.

The skepticism is not without reason. The server business, long Intel’s profit engine, continues to cede ground to AMD and ARM-based rivals. A fresh analysis from UBS has reinforced that narrative, noting that the market-share pressure in data centers shows no sign of abating. This is a sensitive spot for a stock that has been priced for a full-blown operational rebirth. When the highest-margin segment looks shaky, even small doubts can trigger outsized selling.

Should investors sell immediately? Or is it worth buying Intel?

Yet the selloff masks a more nuanced picture on the operational front. Intel beat expectations in its latest quarter, logging revenue of $13.58 billion — $1.26 billion above the midpoint of its own guidance — and earnings per share of $0.29, far ahead of the negligible profit analysts had forecast. The company’s 18A process is reportedly seeing better yields than internal plans had anticipated, and CEO Lip-Bu Tan has pointed to early progress in turning the technology into a competitive weapon. Chief Financial Officer David Zinsner recently indicated that the foundry could hit its year-end yield targets by mid-2026, sooner than initially projected.

The potential partnership with Apple adds a layer of strategic intrigue. Reports of a preliminary agreement to manufacture certain M-series chips for the MacBook Air and iPad Pro have buoyed expectations, with a potential annual volume of 15 million to 20 million units. While no official confirmation has been provided by either party, a deal of that magnitude would lend credibility to Intel’s foundry ambitions. Microsoft is also planning to produce its Maia 2 AI accelerator on Intel’s process, and Amazon Web Services is collaborating on custom Xeon chips and interconnect components.

Institutional investors, meanwhile, are not uniformly fleeing. iA Global Asset Management increased its stake by 17%, now holding 593,043 shares. Overall, institutions still own 64.53% of Intel’s stock. On the insider side, Executive Vice President April Miller Boise sold roughly 40,000 shares at an average price of $100 in early May, a move that has been interpreted as caution from within.

Intel at a turning point? This analysis reveals what investors need to know now.

The counterbalance to the bearish case comes from Intel’s steady operational improvements and a growing list of design wins. The company’s partnership with McLaren Racing, providing Xeon and Core Ultra processors for aerodynamics and race strategy, offers another real-world showcase of its capabilities. But the market wants more than anecdotes — it needs to see that better chips and AI-oriented designs can translate into lasting market-share gains.

The next major test arrives on June 2, when Lip-Bu Tan speaks at Computex. Investors will be listening for concrete evidence that the foundry losses are on a visible path to improvement, and that Intel can defend its server turf while chasing new customers. For the second quarter, management has guided for earnings of roughly $0.20 per share. Without a credible plan to narrow the foundry deficit, the stock’s 179% year-to-date gain will remain a fragile bet — a rally built on promise that is now being asked to deliver proof.

Ad

Intel Stock: New Analysis - 18 May

Fresh Intel information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

Read our updated Intel analysis...

en | US4581401001 | INTEL | boerse | 69366563 |