Intel's Foundry Business: A Strategic Hedge Against the U.S.-China Tech Divide

The U.S.-China tech war has reached a boiling point, with semiconductors at its epicenter. As geopolitical tensions escalate over supply chain dominance and intellectual property, Intel (NASDAQ: INTC) stands uniquely positioned to capitalize on the demand for domestic chip production. Its foundry business, often overlooked in favor of flashier rivals like NVIDIA or AMD, is emerging as a critical geopolitical play. Here's why investors should pay attention.

The Geopolitical Catalyst: Why U.S. Chip Manufacturing Matters

The U.S. semiconductor industry faces a stark reality: 80% of global chip production is concentrated in Asia, with Taiwan's TSMC and South Korea's Samsung dominating advanced nodes. This reliance has become a national security risk amid U.S.-China trade wars and fears of supply chain disruptions. Enter the CHIPS Act, a $52 billion bipartisan initiative to boost domestic semiconductor manufacturing. Intel, with its sprawling U.S. facilities in Arizona, New Mexico, and Ohio, is the law's poster child.

Intel's geographic advantage is unmatched. While competitors like AMD and NVIDIA outsource production to Asian foundries, Intel's vertically integrated model—designing, manufacturing, and selling chips—positions it to capture demand from U.S. firms seeking to insulate themselves from geopolitical volatility. This is no small opportunity: the U.S. government is offering tax incentives and grants to companies that “onshore” production, creating a tailwind for Intel's foundry business.

Valuation: A Rare Bargain in the Chip Sector

Intel's stock has been a laggard compared to AI-driven peers, but this creates an asymmetric opportunity. At a P/S ratio of 1.7 and P/B of 0.9 (well below peers' valuations), the stock reflects short-term execution challenges rather than its long-term potential. Contrast this with NVIDIA (P/S 6.2) and AMD (P/S 3.5), which trade at premiums despite overhangs from supply constraints and regulatory scrutiny.

Technology Leadership: The 18A Node and AI Infrastructure

Intel's foundry business isn't just about geography—it's about technological leadership. Its 18A process node, set to debut in 2025, rivals TSMC's 3nm technology in performance, while its PowerVia backside power delivery reduces latency for AI workloads. These innovations are critical for U.S. firms developing AI chips, autonomous vehicles, and defense systems.

The scalability of Intel's foundry is another underappreciated strength. While current losses (e.g., Q2 2025's projected $(0.32) GAAP EPS) reflect upfront investments, the business's operating leverage is substantial. As utilization rates rise and advanced nodes come online, margins should expand meaningfully.

The Risks: Near-Term Volatility vs. Long-Term Certainty

Bearish arguments focus on Intel's struggles in consumer markets and its lag in AI silicon. Yet these issues are being addressed: its Panther Lake CPUs and AI-optimized Foveros 3D packaging aim to reclaim PC performance leadership, while its foundry partnerships with Qualcomm and Microsoft underscore its enterprise credibility.

The bigger risk lies in geopolitical détente, but this scenario seems unlikely. U.S.-China tensions are structural, not cyclical, and the CHIPS Act's funding guarantees a decade-long tailwind for domestic production.

Investment Thesis: Buy Intel for the Long Game

Intel is a value play with growth legs. Its undervalued stock, strategic CHIPS Act tailwinds, and leadership in advanced nodes make it a rare buy in a frothy semiconductor sector. While near-term earnings may disappoint, the foundry's scalability and geopolitical necessity position it to outperform over 3–5 years.

Recommendation: Accumulate Intel shares below $25 (current price: ~$20.06 as of June 6, 2025). Set a 12–18 month price target of $32–$35, reflecting P/S expansion to 2.2–2.5 as foundry revenue scales.

Final Word

In a world where semiconductors are the new oil, Intel is the OPEC of U.S. chip production. With bipartisan support, cutting-edge tech, and an undervalued stock, it's primed to benefit from the biggest geopolitical realignment since the Cold War. This isn't just a stock pick—it's a bet on American tech sovereignty.