Nvidia Just Signaled Intel's Foundry Gamble Is In Trouble

Intel’s remarkable stock rally—surging over 100% in the past six months under new CEO Lip-Bu Tan’s leadership—has captured investor enthusiasm. The company has secured backing from both the U.S. government and Nvidia, and markets seem to believe in its turnaround story. Yet beneath this optimistic surface lies a critical vulnerability that few investors have fully grasped.

Nvidia made a quiet but consequential decision last month: after testing Intel’s newest 18A chip manufacturing process, the AI computing powerhouse declined to move production forward with Intel as its foundry partner. This decision may deliver a far more serious blow to Intel’s recovery plans than the 4% stock dip on the day of the news suggested.

The Foundry Bet That Defines Intel’s Future

Intel’s entire restructuring hinges on one ambitious goal: transforming itself into a world-class contract chip manufacturer, competing directly with industry titans like TSMC and Samsung. This isn’t a new ambition. The company established Intel Foundry in 2021, burned through billions of dollars building cutting-edge fabrication capabilities, and is just now beginning volume production on its most advanced offering: the 18A process (where the “A” refers to 18 angstroms, or roughly 1.8 nanometers).

CEO Tan spoke optimistically about this milestone during recent earnings calls, highlighting “steady progress” and “steadily improving yields” as customer demand supposedly surges. The language suggested confidence. But there’s a problem: Intel has yet to lock down even a single major external customer willing to trust their production to this unproven process. Without validation from a tier-one chip designer, the entire foundry strategy remains theoretical.

What Nvidia’s Silence Actually Means

The Nvidia decision carries outsized significance for several reasons. First, Nvidia sits at the center of the AI boom—its processors power the infrastructure that defines this era. Second, the company invested $5 billion in Intel last September, creating a vested financial interest in Intel’s success. Yet that investment came with no commitment that Nvidia would actually use Intel’s manufacturing services.

This distinction matters enormously. A cash investment and a production partnership are not the same thing. Nvidia’s choice to pass on 18A suggests that whatever technical concerns exist—whether around manufacturing yields, process maturity, or competitive positioning—they outweighed the potential benefits of supporting Intel’s foundry ambitions. The company could have validated Intel’s new process and simultaneously boosted returns on its own investment. That it chose not to is telling.

The Customer Validation Problem

Intel’s challenge extends beyond Nvidia. Reports from nearly a year ago indicated that Broadcom, another major chip designer, was evaluating the 18A process as well. Yet no public announcements have materialized about major production commitments. For Intel to prove its foundry business is viable—and not just an expensive experiment—it needs external customers beyond its own internal chip designs.

Without customer adoption, Intel Foundry remains a financial anchor dragging down overall company performance. The business has operated at substantial losses since its 2021 launch, with the path to profitability entirely dependent on proving it can manufacture world-class chips for outside clients at competitive costs.

Why Investors Should Recalibrate Their Position

The stock’s 100% rally over six months already prices in an optimistic turnaround scenario. Add to this the fact that much of Intel’s future value rests on unproven assertions: that 18A will achieve competitive yields, that major customers will arrive soon, and that the foundry business will eventually become profitable.

Nvidia’s decision to decline the partnership removes an important near-term validation catalyst. It suggests that from the perspective of the industry’s most prominent AI architect, Intel’s manufacturing capabilities—at least in their current form—may not yet meet the stringent requirements of next-generation chip production.

The Bottom Line for Investors

Intel’s investment in developing advanced foundry capabilities demonstrates ambition and long-term strategic vision. Tan’s leadership appears to be stabilizing the company. Federal support provides financial cushion. Yet until Intel secures major external customers for 18A and proves it can deliver chips that meet the demanding standards of Nvidia, Broadcom, and other design leaders, this remains a high-risk, high-reward turnaround story rather than a completed turnaround.

For investors who have already ridden the recent rally, this moment calls for caution and renewed scrutiny. The next major catalyst won’t be optimistic CEO commentary or government support—it will be a major customer announcement. Until that happens, the most prudent stance is to remain vigilant about Intel’s foundry execution, because the company’s long-term value creation just hinges more than ever on whether external customers believe in the 18A process. Betting otherwise may prove more painful than the recent stock surge suggests.