Intel's Tesla Win and Software Breakthrough Can't Hide $2.4 Billion Foundry Sinkhole

Intel shares triple on AI demand, but Q1 reveals $2.4B foundry loss, supply constraints, and reliance on Tesla's 14A deal for future node viability.

Intel shares have more than tripled since the start of the year, climbing from around €17 to briefly touch €110 in early May before settling at €103 on Xetra. The rally reflects a surge in AI-driven demand for both CPUs and data center hardware, but the chipmaker's latest quarterly figures reveal a far messier reality beneath the surface.

The Numbers Tell Two Stories

Revenue for the first quarter hit $13.6 billion, a 7% increase year over year, propelled by a 22% jump in the Data Center & AI segment to $5.1 billion. The foundry business, Intel Foundry, posted $5.4 billion in sales — yet racked up an operating loss of $2.4 billion. Restructuring charges dragged the GAAP net result to a loss of $3.7 billion. For the current quarter, management guided revenue in a range of $13.8 billion to $14.8 billion.

The revenue growth is real, but the profitability picture remains deeply fragmented. Intel is capturing the AI wave, yet its own manufacturing arm is burning cash at a rate that raises questions about how long the company can sustain both its internal chip development and its ambitious foundry roadmap.

A Hardware Squeeze and a Software Surprise

The broader supply chain is adding pressure. A fresh report from the server supply chain points not to a lack of AI orders, but to tight electricity capacity, labor shortages, and funding bottlenecks that are slowing infrastructure buildout. Intel itself acknowledged in its quarterly filing that internal and external supply constraints prevented it from fully meeting demand — and those constraints are expected to persist into 2026.

On the positive side, the ongoing CPU shortage has been a hidden advantage: Intel has been able to sell even defective chips profitably, boosting wafer yield and lowering fixed costs. The company also unveiled SuperClaw, a new software platform that promises to cut token consumption by 70%, and launched the Core Ultra Series 3 for edge AI robotics. These moves signal that Intel is not just relying on hardware sales but is trying to build a software ecosystem to differentiate its offerings.

Tesla Picks 14A

A major strategic win came from Tesla, which has selected Intel's upcoming 14A manufacturing node for future chips. That commitment provides a vote of confidence in Intel's process technology at a time when the company is warning investors that it may have to pause or cancel development of 14A and subsequent nodes if it cannot secure enough external design wins. "If we don't get enough foundry customers for leading-edge nodes, future Intel chips beyond 18A might be made by external foundries," the company stated bluntly in its earnings report.

CEO Lip-Bu Tan is pushing both the 18A and 14A processes forward, but the capital intensity of leading-edge fabrication imposes hard limits. The Tesla deal eases some of that pressure, but does not eliminate the risk.

Analyst Divergence and the Road Ahead

The stock's meteoric rise has left Wall Street deeply split. The consensus rating is "Hold" with a median price target around $88, while the most bearish forecasts sit near $70. Citigroup is far more optimistic, setting a target of $130, betting that Intel's execution on AI and foundry will eventually justify the valuation. The current share price of roughly €103 (about $110) already exceeds the median target, implying that much of the optimism is already priced in.

Intel is set to present further hardware and foundry updates at COMPUTEX in Taipei in June. There, the company will lay out the next milestones for its manufacturing technology — and face the ultimate test of whether it can convert its massive stock rally into sustainable operational delivery. The physical limits of the AI supply chain, the foundry losses, and the need to fund a multi-billion-dollar process roadmap all converge on the same question: Can Intel execute at the scale its share price now demands?