Intel (INTC.US) Decline Continues: PC Slowdown Is Just the Trigger, Foundry Dilemma Is the Main Issue

According to Zhitong Finance APP, after the bleak outlook in the PC market triggered Intel (INTC.US) shares’ largest single-day drop since the 1970s, the company is facing mounting pressure to get its struggling foundry business off the ground.

PC Market Deterioration Pushes Intel Stock to Biggest Single-Day Drop Since the 1970s

For Intel, the foundry business has long struggled to take off. Over the past five years, the company has allocated a large portion of its $108 billion capital expenditure in a bid to challenge TSMC (TSM.US), but it has yet to win major clients for its most advanced chips, mainly continuing to manufacture chips for its own products.

Wall Street’s patience is wearing thin. After the U.S. government acquired a 10% stake in Intel in August 2025, Nvidia (NVDA.US) also invested $5 billion, prompting a surge in Intel’s share price, which increased sixfold over ten months and peaked in June. Intel finally found its footing in the AI boom by supplying CPUs for agent-based AI, while market optimism over its foundry vision also increased.

However, last Thursday, Intel’s situation took a sharp turn for the worse. The company announced that quarterly revenue would miss analysts’ expectations by $1 billion to $2 billion, due to the PC market continuing to be hit by surges in memory and other component costs. The PC segment still accounts for around half of Intel’s revenue, and consumers have become increasingly reluctant to upgrade devices.

Last Friday, Intel's stock price plummeted 29%, marking its worst single-day performance since the 1970s. According to FactSet data, it fell 45% in October, the biggest monthly drop on record. In Monday trading, the stock dropped another 8.8%.

Intel’s investments in the future were supposed to start paying off. CEO Justin Chen said that over the next five years, the global server processor market could expand up to five times, reaching about $200 billion. In Q3, Intel’s data center business grew 78% year-over-year to $7.3 billion.

However, Intel said it could not produce enough chips to meet demand, pointing out industry-wide supply constraints of wafers, substrates, and memory—factors also hurting PC sales.

Five Years of Investment but Still No Major Clients, 18A Capacity Shifted to Legacy Nodes

This has forced Justin Chen to make tough choices. To tackle capacity shortages, Intel said it is shifting part of its Oregon facility's capacity from advanced 18A chip wafers to older Intel 3 nodes, for use in its data center products.

Intel relies on its 18A process to attract external foundry clients, so this resource reallocation could complicate such efforts. Harvard Business School professor David Yoffie, who served as an Intel board member for nearly thirty years, said the latest move is not reassuring for potential foundry customers.

“They worry that if Intel doesn’t consistently have excess capacity beyond its own needs, then it’s not a very credible supplier,” Yoffie said. If no large-scale foundry customers materialize within a year, “the economic pressures on Intel will become much more visible.”

An Intel spokesperson said in a statement: “Customers’ confidence in Intel’s foundry depends on execution. We are delivering on our technology roadmap, demonstrating strong 18A performance and progress on 14A. We continue to see strong customer engagement and remain focused on winning business through continued execution.”

Intel is best known for its industry-leading central processing units (CPUs). Nvidia and AMD (AMD.US) graphic processing units (GPUs) have dominated the early AI boom, thanks to their prowess in handling heavy training and chatbot inference workloads, while Intel’s CPUs are crucial for running virtual machines used by agent applications such as Meta (META.US) Muse.

Mizuho Securities analyst Jordan Klein said in an interview that as one of the few companies globally able to manufacture and package advanced chips for its own products, Intel has “more control over its destiny” than most chipmakers. “If you don’t have enough capacity, you leave money and revenue on the table,” Klein said.

Former CEO Pat Gelsinger was ousted at the end of 2024, after aggressively pursuing foundry investment during his four-year tenure to catch up from 7nm and 10nm technology delays. These advanced process nodes enable more transistors per chip. Justin Chen has adopted a more cautious strategy, limiting spending until customer demand is locked in. He said last Thursday that “several customers” will be announced in the next two quarters.

The 18A chips for Intel’s own use are now in high-volume production in Arizona, with a second factory under construction. The first structural truss just went up at the new Ohio facility, but the project is nearly five years behind schedule.

Competitor and Foundry: Customer Concerns and Spin-off Controversy

Yoffie stated that another barrier for Intel in attracting new customers is that chipmakers such as Broadcom (AVGO.US) and Qualcomm (QCOM.US) may be reluctant to let their chips be manufactured by a company that is also a competitor on the product side.

“The right solution is for Intel to spin off the foundry business,” Yoffie said, calling this “not only the best option, but probably the only one.”

Klein remarked that AMD is likely the only major chipmaker not interested, as the two companies directly compete in the CPU market. He said it’s a “competition, confidentiality, and privacy issue.” AMD will report its Q3 earnings after the close on Tuesday.

Yoffie said America needs Intel to succeed. “Ultimately, TSMC can at most build 20% to 25% of its global capacity in the U.S., and that will still take years,” he said. “If the U.S. doesn’t have its own foundry, any geopolitical problem or supply chain crisis like during the Covid era will hurt both the nation and the U.S. semiconductor industry.”