Intel Foundry’s $1 Trillion Upside

Intel (INTC) foundry business has finally hit its stride after years of setbacks. Intel’s 18A process node, its most advanced yet, is in commercial production. The company has secured business from marquee external customers. Its U.S.-based manufacturing assets are increasingly treated as strategically irreplaceable. The markets have taken notice, with the stock up roughly 3x year-to-date and nearly doubling in the past month alone.

The foundry case is straightforward. Semiconductors sit at the foundation of virtually every major technology today, and the ability to manufacture them near the leading edge, on U.S. soil, is a capability very few companies possess. The question now is how large that opportunity becomes. Could it be enough to push Intel’s market capitalization still higher?

Several developments have driven the recent move. Taken together, they make a case that the stock may have further upside in the coming years.

Apple Chips

Apple (AAPL) and Intel have reached a preliminary agreement for Intel to manufacture some of the chips that power Apple devices. Apple has long relied on TSMC for chip production and has faced supply constraints as a result. A partnership with Intel would address both concerns simultaneously, reducing Apple’s geographic concentration risk while supporting its public commitment to U.S. manufacturing. Apple’s volume and technical requirements represent a level of demand that would materially change the utilization profile of Intel’s foundry business. For a foundry business building its external customer base, landing Apple would be the most consequential single win to date.

Terafab Project

Elon Musk’s Terafab project will use Intel’s design, manufacturing, and packaging expertise for AI chips serving Tesla’s (TSLA) robotics program and xAI’s data centers. Terafab is Musk’s initiative to build a domestically sourced AI compute stack, from chip design through data center deployment, reducing dependency on TSMC and Nvidia. Intel Foundry’s selection could be viewed as an endorsement of Intel’s overall production readiness. The fact that Tesla, a company with the capital and engineering depth to build its own fabs, chose Intel helps to establish foundry credibility. It was also the first public signal that 14A, Intel’s next-generation node, has a committed anchor customer.

18A Yields And 14A Progress

Intel’s 18A process node, the most advanced to date, is now in commercial production with yields tracking ahead of Intel’s internal 2024 roadmap. That matters because yield performance at leading-edge nodes is where Intel has historically fallen short, and it was the central concern among skeptics of the foundry thesis. The next-generation 14A node is also showing solid early results. Intel says that at a comparable stage of development, 14A is tracking ahead of where 18A was, with better external customer engagement and more mature design infrastructure. Firm customer commitments are expected to begin in the second half of 2026.

Government Backing And Geopolitical Position

U.S. government CHIPS Act funding has converted a portion of Intel’s capital risk into a federal obligation. Intel has received, or is in line to receive, approximately $8.5 billion in direct grants plus access to roughly $11 billion in government loans, together covering a material share of the Arizona and Ohio fab costs.

Persistent U.S.-China trade tensions have added a further dimension to that support. TSMC manufactures the vast majority of the world’s leading-edge logic at facilities concentrated in Taiwan, and there is no effective contingency plan if access to those fabs is disrupted. Intel is the only company that now offers one. External customer revenue still remains thin, and utilization rates have room to grow, but the asset exists, and it is gaining traction.

CPUs Return To The Center Of The AI Stack

Intel built its business on CPUs, and for much of the past few years that looked like a liability as the AI boom sent demand for GPUs soaring. That calculus is changing. CEO Lip-Bu Tan noted on the Q1 earnings call that the ratio of CPUs to GPUs in AI deployments has moved from roughly 1:8 toward 1:4 and could approach parity as multi-agent AI systems expand. The shift is structural: as AI moves from training large models to running inference and powering agentic workloads, the CPU reasserts itself as the coordination layer across the stack. Intel is one of the few companies positioned to benefit on both sides of that equation, with an established CPU product line and, increasingly, the domestic manufacturing capacity to supply it at scale. See The AI Shift That Nobody Is Pricing For Intel Stock

The Making Of A $1 Trillion Business?

To be sure, Intel stock looks expensive, trading at about 115x estimated 2026 earnings and 60x estimated 2027 earnings, with revenue growth projected at under 2% this year and approximately 7% next. The market is assigning probability to Intel Foundry reaching high-utilization, high-margin steady state by 2028 and beyond. Despite the high valuation, there could be real upside. Here is some simple math.

The global semiconductor market is projected to exceed $1.6 trillion by 2030, more than doubling from 2024 levels. ^[1] If Intel eventually captures say 7.5% of that market, it implies roughly $120 billion in annual foundry revenue. At 30% net margins, well below TSMC’s current 45% margins, that is $36 billion in profit. How Intel’s margins compare with rivals. A 25x multiple on the foundry business implies a potential valuation of $900 billion for the segment. Sure, a large mix of that is already factored into Intel’s stock in the recent months given the big rally, but it’s still well ahead of Intel’s current $600 billion market cap.

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1. McKinsey [↩]