Intel’s Turnaround May Be the Best Bet No One’s Watching

Key Points

• Intel's new leadership is aggressively optimizing operations and divesting non-core assets to sharpen strategic focus.
• The company's stock trading below its asset value indicates a significant potential for long-term value appreciation for patient investors.
• Foundational investments in advanced manufacturing and a robust product pipeline are paving the way for future market leadership.

Recent semiconductor sector news from late May indicates that Intel Corporation NASDAQ: INTC has discovered an alleged embezzlement, which media outlets have dubbed the "chip bandit." Over $840,000 was reportedly involved in the embezzlement at its Israeli operations.

This sum is financially insignificant for a company with a market value of nearly $90 billion. Yet, this event holds significant symbolic meaning when viewed under the right light.

It highlights a proactive approach to efficiency and accountability under the new CEO, Lip-Bu Tan. Investors should consider that assuming a new role, including one as significant as Intel's CEO, naturally requires some time for adaptation. Having gained his leadership position in March 2025, Intel is now starting to show increasing signs of momentum just two months into his tenure. 

The company’s strengthened internal focus points to an even larger financial narrative for Intel that most investors are not paying attention to: the company's stock currently trades at a notable discount to its asset value. For investors, this raises a key question.

Does this internal tightening, combined with the broader strategic moves, suggest Intel is an undervalued opportunity ready to be taken for the long ride? 

Why Intel's Valuation Signals Opportunity

Intel's current stock valuation presents an interesting puzzle for investors to ponder. The company's shares are trading at a price-to-book ratio (P/B) of approximately 0.84. This metric compares a company's market value to its book value. Book value is what a company would be worth if it sold all its assets and paid off all its debts.

Consider these figures:

• Intel's market capitalization as of late May was approximately $88.18 billion.
• The company's book value as of the first quarter of 2025 was approximately $106 billion.

A P/B ratio below 1.0 means the market values the company at less than its accounting assets. For a major technology firm like Intel, this can suggest the stock is oversold or considerable future challenges are currently being priced into the stock.  

How Strategy Paves the Way for Intel’s Growth

CEO Lip-Bu Tan leads Intel's turnaround with a clear plan focused on efficiency and core strengths. The overall drive for efficiency, symbolized by catching the embezzlement, is supported by aggressive cost-cutting measures currently being undertaken by the company, including:  

• Financial Optimization: Intel plans to reduce its workforce significantly, potentially by over 20%. This is part of a restructuring initiative aimed at enhancing agility. The company also aims for lower operating expenses in 2026, with gross capital expenditures targeted at $18 billion, down from $25 billion in the previous year.
• Portfolio Optimization: Intel is exploring the sale of its Networking and Edge (NEX) unit. This division generated $5.8 billion in revenue and $931 million in operating income in 2024. Selling NEX would sharpen Intel's focus on its core PC and Data Center chip businesses. It would also free up capital and management resources. This follows the divestment of a 51% stake in the Altera FPGA business, showing a pattern of strategic asset monetization.
• The Foundry Vision: Intel's Foundry Services (IFS) is vital for future growth. Chief Financial Officer Dave Zinsner stated on May 13 that IFS is "highly confident" of reaching break-even status by 2027. Commitment to the Ohio plant, a major domestic manufacturing project, remains firm. CEO Tan actively engages customers to build trust and secure product wins for IFS, a crucial part of this long-term growth engine.

Why Intel's Stock Could Surprise Investors

Despite these strategic initiatives, Intel's stock remains subject to market skepticism.

In late May, shares were trading around $20.22, representing a 33% decline over the past year.

Analyst sentiment remains cautious, with a Reduce consensus rating and an average price target of $21.57 suggesting only a modest upside.

Investors remain concerned by Intel's Q2 guidance, which projected breakeven non-GAAP earnings per share (EPS).

Ongoing operating losses from IFS, which amounted to $2.3 billion in Q1, also fuel this caution.

However, if Intel can show incremental progress in narrowing these losses and meeting its guidance, sentiment may gradually begin to shift in a more favorable direction.

The Contrarian View

However, this pessimism may overlook foundational strategic shifts. Intel holds significant inherent strengths:

• Extensive ownership of foundries on U.S. soil, which is strategically important.
• Substantial scale, evidenced by its Q1 revenue of $12.7 billion, is significantly larger than competitor AMD's NASDAQ: AMD $7.4 billion in Q1 revenue.
• Ongoing product innovation, including Arc Pro Battlemage GPUs and Gaudi 3 AI accelerators. Upcoming Panther Lake and Nova Lake CPUs are also in the pipeline.
• Recent partnerships, such as the selection of Intel's Xeon 6 CPU for Nvidia’s DGX B300 AI System.

This contrarian perspective argues that the stock's current discount to its asset value may provide a significant margin of safety, with considerable downside already priced in.

Why the Long Game May Pay Off

Intel's current valuation presents a unique investment proposition for those with a long-term view. This discount and a clear strategic pivot under new leadership highlight a potential opportunity. CEO Tan's focus on operational streamlining, strategic divestments, and committed investment in the foundry business aims to unlock intrinsic value.

While Intel's turnaround is a multi-year effort, and success is not guaranteed, the stock's current price-to-book discount and the strategic groundwork being laid could significantly improve the odds of long-term profit. This makes Intel a potential candidate for patient, risk-tolerant investors comfortable with a contrarian stance.