For years, the easy line on Intel (NASDAQ:INTC) was that it had become a fallen giant, losing ground on chip design and manufacturing at the same time. That line has aged badly. The stock now trades at a multiple usually reserved for high-flying growth names. Here’s the twist: the part of Intel that best explains that price is also the part that has proved the least.
Intel designs and builds processors, the chips at the heart of most laptops and a large share of the servers inside data centers. It makes most of its money selling those chips to PC makers and cloud operators. It’s also building Intel Foundry, a contract manufacturing arm meant to produce chips for other companies.
For investors evaluating the 10 Best Growth Stocks to Buy Now According to Billionaires, the real question isn’t whether Intel’s turnaround is happening. It’s whether they are paying for the turnaround they can see, or for one that hasn’t shown up yet.
The Chip Business Is Back
Start with what’s working. In the second quarter of fiscal 2026, revenue rose 25% to $16.1 billion. The Data Center and AI segment grew 59% to $6.3 billion, as AI workloads pushed up demand for server processors. The PC-focused CCPG segment added 13% growth, reaching $8.9 billion.
Profitability moved even more. Non-GAAP gross margin (which strips out items like stock compensation and one-time charges) jumped 12.1 percentage points to 41.8%. CEO Lip-Bu Tan described it as Intel’s fastest revenue growth in more than 15 years, while CFO Dave Zinsner credited better factory yields and shorter production cycles. That AI-driven pull on general-purpose processors is also a tailwind for other hardware leaders featured among the 10 Best AI Stocks to Buy Before They Explode, all tied to the broader data center build-out.
Proof on the Factory Floor
The manufacturing story has real milestones too. Xeon 6+ launched as Intel’s first server chip built on its 18A process, Panther Lake entered high-volume production for some products, and the 18A-P variant hit risk production on schedule. Intel Foundry revenue grew 31% to $5.8 billion.
Outside interest is building, slowly. Fortinet is developing a security processor using Intel’s design, packaging, and manufacturing capabilities. Last month, according to CNBC, Intel shares jumped on a report that it was discussing US memory chip manufacturing with SK Hynix. Intel also guided third-quarter revenue to between $15.8 billion and $16.8 billion, with non-GAAP gross margin of 42%.
Where Are the Big Foundry Customers?
This is the gap skeptics keep circling. Intel’s own release says its next major process, 14A, depends on winning external customer design wins and demand commitments, and none were announced. Meanwhile, spending is climbing. Zinsner said Intel is significantly increasing investment in equipment, clean rooms, and substrates, and the company committed €5 billion to expand Intel 3 capacity.
The cash picture reflects that strain. Operating cash flow surged to $7.0 billion, but adjusted free cash flow came in at negative $8.4 billion, driven mainly by $12.2 billion in net partner contribution outflows. With $48.5 billion in long-term debt, Intel needs outside volume to make that spending pay off. Heavy factory spending is a familiar burden for companies building US chip capacity, and Intel’s bill is still growing, even as smart money leans heavily toward the 10 Best Growth Stocks to Buy Now According to Billionaires that offer clearer paths to compounding capital.
A Price That Assumes Success
At 68.82 times forward earnings, as of October 9, Intel trades far above the sector’s 23.35 multiple and even above its own 5-year average of 61.82. Put simply, buyers are paying $68.82 for every dollar of expected profit, while the sector goes for $23.35.
Which earnings matter here? GAAP results showed a loss of $2.16 per share, but that was driven by a $12.5 billion non-cash mark-to-market loss on escrowed shares tied to Intel’s U.S. government agreement. Adjusted earnings tell the operating story better: non-GAAP EPS of $0.42, up from a loss of $0.10 a year earlier.
Growth is coming, with analysts expecting EPS to rise 36.89% in 2027. That’s strong. But it doesn’t fully close the distance between Intel’s multiple and the sector’s. In other words, the market is pricing in a foundry that wins customers, not just a CPU business that’s healed. That’s a very different bet from owning its longtime rival AMD, which leaves manufacturing to outside partners.
Big money seems to agree something has changed. Hedge fund interest climbed, with 138 funds holding the stock in the most recent quarter, up from 112 in the prior one. Short interest sits at 3.01% of the float, a sign of relatively limited bearish positioning.
The Foundry Has to Pay Off
Intel’s product turnaround looks real, and its margins prove it. The valuation, though, rests on a foundry business that still needs outside customers to justify the spending. That makes the stock better suited to patient investors comfortable with volatility than to anyone looking for a margin of safety. A committed major customer for 14A would strengthen the case considerably. Another quarter of rising spending without one, when Intel reports later this month, would make that premium harder to defend.
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