Intel Beyond 2025: Ultra Broad-Dive Primer - Could Intel One Day Disrupt NVIDIA in AI Hardware? (Part 1)

Centrino Revolution 2 + Edge AI: Raft of Enablement + AI Everywhere + IFS = Lockheed Martin of Tomorrow + AI Rising Tide Lifts All Boats... including CPU TAM??

Intel Beyond 2025: Ultra Broad-Dive Primer

• The aim of this Part 1 report is to help investors comprehensively understand each of Intel’s business units and their future performance trajectory in as short of a time as possible.

• The quickest way to do so is to start from the top, and progressively drill-down into the lower-level details. This will give readers a holistic bird’s eye view of Intel’s operations in its entirety when attempting to estimate its valuation.

• At the highest level, we start with Intel the company. The immediate child topics at the subsequent level in this Part 1 report are:

  • Intel’s 5 major business segments: Client Computing Group (CCG), Data Center and AI (DCAI), Network & Edge (NEX), Mobileye, Intel Foundry Services (IFS), and All Other. CCG and DCAI consistently represented approximately 50% and 30% of total revenues throughout FY20, FY21 and FY22 respectively.

  • 5 Nodes in 4 Years: Intel’s new CEO’s masterplan is called “5 Nodes in 4 Years”, and represents Intel’s plan to regain transistor performance and power performance leadership by 2025. In this section, we shall also understand each of Intel’s semiconductor breakthroughs over the life of this masterplan including PowerVia (backside power delivery), RibbonFET (GAA), EMIB and Foveros — all of which will contribute towards achieving this objective.

  • Intel and AI: In this section, we’ll explore Intel’s role in the upcoming AI revolution. Contrary to popular opinion, we shall see how Intel stands to benefit from AI’s “rising tide that lifts all boats” — mimicking the Centrino revolution of the early 2000’s, where Intel benefited from intelligently adapting to consumer’s shifting preferences towards mobile over bulky PCs.

  • Why Beyond 2025? Both of Intel’s major projects, its “5 Nodes in 4 Years” masterplan and the IFS segment are only expected to truly pick up steam in 2025 and beyond. End-2025 is also just slightly over 2 years away, which is well within the LT investment horizon of value investors — and after which most of the sellside’s ST concerns around Intel’s GM and FCF will believably subside.

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What If Titanic Could Float?

• This Is Not A Semiconductor Engineering Primer. This is an Intel Investment Primer: Doing a deep-dive into every relevant aspect of Intel’s businesses (CPU, Enterprise, Datacenter, Foundry, etc) and cultural context would span the length of an entire book. Instead of discussing semiconductor engineering in granular technical detail, this Intel investment primer aims to help investors understand Intel as a business and its financial implications. This will help dramatically shorten this already lengthy Part 1 report, e.g. recognizing that the financial impact from PC CPU competition with AMD can ultimately be commoditized as price vs performance, without going into the technical performance details and market competitiveness of each chip.

• Why Ultra Broad-Dive? The aim of this Part 1 report is to help investors comprehensively understand each of Intel’s business units and their future performance trajectory in as short of a time as possible. Given the expansive breadth of Intel’s operations, readers are better served dipping their toes into each pie and gaining a holistic 360° view of the entire Intel ecosystem — rather than diving deep into the technical intricacies of EMIB and Foveros, and missing the forest for the trees. However, there will be plenty of detailed footnotes¹ & related links to other sites provided for those who would like more generous detail into each technical aspect of the respective semiconductor area.

What If Titanic Could Float? That was the question that I asked myself after I had completed my INTC 0.00%↑ analysis recently. Market consensus is deeply pessimistic about Intel’s future prospects for several reasons — concerns on Gross Margin & FCF trajectory, its pivot into the highly capital-intensive external foundry business, playing EUV catch-up, ability to execute, market competitiveness with incumbents TSMC & Samsung, PC chip undercompetitiveness vs AMD, the ARM revolution, accelerator trends favoring NVDIA spend. However, many of the sellside concerns raised appear to be overtly focused on the short-term, e.g. GM and FCF trends before 2026, which is before Intel’s “5 Nodes In 4 Years” masterplan and IFS segment are even expected to pick up full steam. This is perhaps one of the few Intel stock reports that is even looking beyond 2025.

What Is NOT Priced In? If there were a point of maximum pessimism for Intel, this is exactly what it would look like. What Does Not Seem To Be Priced In are several tailwinds blowing behind Intel’s back — its upcoming stature as the only reliable external foundry in the Western Hemisphere in a sector representing increasing national strategic interest (“Lockheed Martin of Tomorrow”), a 2nd Centrino Moment where AI ironically uplifts CPU TAM, Intel’s strategic positioning in AI enablement on the Edge, the benefits of vertical integration as an IDM in the chiplet revolution, Intel’s headstart in advanced packaging (e.g. EMIB, PowerVia), etc. Could this possibly represent the point of maximum pessimism for Intel’s valuation?

Depressed Valuation Trumps Depressed Fundamentals: If that were all, it might be understandable why markets might still remain skeptical. What really seals the deal is Intel’s current valuation — as while there are legitimate concerns about Intel’s fundamentals, its highly depressed valuation more than offsets these risks in terms of downside protection (i.e. asymmetric risk:reward). Assuming Intel can eventually recover to its average FY18-21 earnings of $20B, its current market cap would represent a normalized PE of just 7.5x.

Why Intel Is The Lockheed Martin of Tomorrow:

New Export Controls! SemiAnalysis, Fabricated Knowledge, and Asianometry with Only the Hottest Takes

1. US to Tighten Rules Aimed at Keeping Advanced Chips Out of China | Bloomberg

2. America extends China chip export bans and acts to cut off backdoor exports

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Check out all of our Intel articles:

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Intel’s 5 Major Business Segments

• Intel (100% of Group revenues)

  • Client Computing Group, CCG (~50%)

  • Datacenter and AI, DCAI (~30%)

  • Network and Edge, NEX (~10%)

  • Mobileye, IFS, All Other (~10%)

In this section, we’ll do a detailed breakdown of Intel’s respective business units. Let’s start with Intel’s largest business segment, CCG.

Client Computing Group (CCG)

• Intel (100% of Group revenues)

  • CCG (~50% of Group revenues)

    • Consumer

    • Enterprise (FY22: 89% of CCG revenues)