Intel's Strategic Shift: Can $18B Capex and $17B Opex Reboot Growth?

In a landscape increasingly dominated by AI-driven competition and geopolitical tensions, Intel’s April 2025 financial updates signaled a pivotal reorientation. Newly appointed CEO Lip-Bu Tan unveiled a bold strategy to cut capital expenditures (capex) to $18 billion and operating expenses (opex) to $17 billion for 2025, down from previous targets. These moves reflect a stark departure from the chipmaker’s historical approach, prioritizing cost discipline and structural efficiency over aggressive expansion. The question now is whether this recalibration can restore momentum to a company grappling with stagnant revenue and rising industry headwinds.

The Numbers Behind the Pivot

Intel’s revised financial targets are underpinned by sweeping organizational changes. Gross capex for 2025 has been trimmed by $2 billion to $18 billion, while net capex—adjusted for asset utilization—will remain within $8–11 billion. This shift aims to channel funds toward high-priority projects, such as its 18A process node, a critical advancement in chip manufacturing competitiveness. Meanwhile, opex reductions to $17 billion (and a further drop to $16 billion by 2026) stem from streamlining operations, flattening management layers, and refocusing R&D on core engineering priorities.

The first-quarter results underscore the urgency: non-GAAP earnings per share (EPS) fell to $0.13, with second-quarter guidance projecting revenue of $11.2–12.4 billion and a near-breakeven EPS of $0.00. These figures highlight the challenges intel faces in a sluggish macroeconomic environment and amid stiff competition from rivals like AMD and NVIDIA.

The Cost-Cutting Playbook

Tan’s restructuring strategy mirrors the playbook of past turnaround efforts at companies like IBM and HP, but with a modern twist. By divesting non-core assets—such as the sale of 51% of its Altera business to Silver Lake and the completion of its NAND chip division sale to SK Hynix—Intel is shedding distractions to focus on its CPU and AI processor strengths. The company also aims to boost capital efficiency by accelerating the utilization of existing construction-in-progress assets, reducing waste in chip fabrication.

The CEO’s emphasis on “going back to basics” includes a renewed focus on customer-driven innovation. This shift is critical: Intel’s leadership in AI chips, particularly its Habana series and Ponte Vecchio GPUs, could be pivotal in capturing the $150 billion AI hardware market by 2030. However, execution risks remain. The company’s ability to meet its 2026 opex target hinges on successfully flattening leadership structures without stifling engineering creativity.

Risks on the Horizon

Despite the strategic clarity, Intel faces formidable challenges. Geopolitical tensions, particularly U.S.-China trade disputes, threaten semiconductor supply chains. Additionally, the company’s second-quarter guidance already reflects a bleak outlook, with revenue expectations nearly halved from pre-pandemic highs. Analysts warn that further delays in its 18A process node—a potential game-changer—could erode its competitiveness against TSMC and Samsung.

The company also faces internal hurdles. Restructuring charges, though excluded from current guidance, could weigh on near-term profitability. Meanwhile, investor patience is thin: Intel’s stock has underperformed peers like NVIDIA by over 40% in the past year, reflecting skepticism about its ability to execute.

Conclusion: A High-Stakes Gamble on Efficiency

Intel’s $18 billion capex and $17 billion opex targets represent a calculated gamble. By slashing costs and refocusing on core technologies, the company aims to realign its finances with a market demanding both innovation and fiscal prudence. The 18A process node, if successfully deployed, could position Intel to reclaim its lead in high-performance computing and AI. Similarly, the divestiture proceeds provide liquidity to fuel strategic bets.

However, the path forward is fraught. Intel must navigate macroeconomic uncertainty, execute complex restructurings flawlessly, and outpace rivals in AI chip design. With its stock trading at 8x forward earnings—well below the industry average of 15x—the market is pricing in significant risk. Yet, if Tan’s strategy delivers on its promises, Intel could emerge as a leaner, more agile competitor. The next 12–18 months will be critical: the difference between a turnaround and a prolonged decline may hinge on whether Intel can convert cost savings into sustained revenue growth. For now, investors are left to wonder if this is the dawn of a new era—or the last gasp of a fading giant.

Data as of Q1 2025. Analysis assumes no major geopolitical disruptions or supply chain collapses.