Intel (INTC.US) has placed most of its future bets on the success of its foundry business as it hopes to become a viable competitor to the likes of TSM.US and Samsung Electronics (SSNLF.US). While investors are increasingly optimistic about the company's progress in foundry, artificial intelligence, and other fields, it may have more upside, if not at the same time.

Northland Capital Markets analyst Gus Richard rated Intel “outperforming the market.” He believes that the company, led by Intel CEO Pat GelSinger, may eventually split into five separate companies — MobilEye, Altera, Foundry, IMS Nanofabrication and Products — with a total value of $68 per share. According to this valuation, Intel's stock price will be about 50% higher than when it closed last Friday. Richard wrote, “These individual companies are probably more valuable than the merged entity. The problem, in our opinion, is the timing of each spin-off.”

Mobileye and Altera

Richard believes that the remaining value of Intel's shares in Mobileye may be as high as $30 billion. Intel divested part of Mobileye's shares in October 2022. Its Programmable Solutions Group (previously known as Altera) could be worth $12 billion, roughly five times its revenue over the past 12 months.

In October, Intel announced its intention to separate the PSG business into a separate business, effective January 1 next year, to continue streamlining its larger business. PSG Group is responsible for Intel's advancement into high-performance communications and data center applications. After becoming an independent company, the group will be led by Sandra Rivera. Currently, Rivera is the general manager of Intel's Data Center and Artificial Intelligence Group.

Intel launched the artificial intelligence (AI) chip Gaudi3 at the “AI Everywhere” press conference held earlier, hoping to gain a larger share in the booming AI hardware market. Gaudi3 is scheduled to be officially launched next year, and will compete with other AI chips such as Nvidia (NVDA.US)'s H100 and AMD (AMD.US)'s upcoming MI300X. Intel says the performance of the Gaudi3 will be superior to Nvidia's H100.

Gelsinger hopes to use the AI boom to revive the company's business. Intel has been hit hard by past mistakes and the slump in the broader PC market. At the same time, its long-time competitor AMD has already seized part of the PC and server market, and some of Intel's largest customers are now starting to design their own chips. Gelsinger believes that AI represents the advent of a new era and has created huge opportunities. More adequate, more powerful, and more cost-effective processing capacity is a key component of future economic growth. “The number of connected devices will quadruple in the next 5 years, and increase to 15 times in the next 10 years.”

According to data, the Intel Gaudi3 will use the 5nm process. The bandwidth is 1.5 times that of the previous generation Gaudi2 (7nm process), the BF16 has 4 times its power, and the network computing power is 2 times that. Gaudi3 is expected to be equipped with up to 128GB of HBM3e memory, greatly improving AI learning and training performance. Intel said that due to growing and proven performance advantages, as well as highly competitive TCO (total cost of ownership) and pricing advantages, Gaudi3 is expected to occupy a larger share of the market in 2024 with leading AI chip kits.

Foundry business

The third entity will be an independent foundry, which Richard said could eventually become the second-largest foundry in the world, after TSMC. Richard wrote, “Intel is probably the only viable alternative leading to TSMC, particularly in high-performance applications such as artificial intelligence integrated circuits, CPUs, GPUs, and FPGAs.”

Earlier, Dutch lithography giant ASML.US (ASML.US) said that the company has begun shipping the most core components of its first latest chip-making machine to a chip factory owned by the American chip maker Intel. According to media reports, people familiar with the matter, who asked not to be named, revealed that the core components of this most advanced system, known as the High-NA extreme ultraviolet (EUV) lithography machine (High-NA extreme ultraviolet) lithography (EUV) lithography machine, have been shipped to Intel's D1X chip factory in Oregon, which means that Intel's ambition to fully shift to the chip foundry field has received the strongest support from lithography technology.

This technology is significant for both tech giants, both of which are the most important leaders in the chip manufacturing industry. Gelsinger has promised that the chipmaker he leads will get the first machine of this type, which shows his commitment to leading Intel back to the global cutting edge of manufacturing technology. As far as Asmack is concerned, the purpose of launching this new technology is to help chip makers such as Intel and TSMC overcome chip manufacturing technology at 2nm and below nodes, and keep the entire chip manufacturing industry dependent on its highest-end lithography equipment.

He estimates that the company's internal manufacturing revenue this year is around $20 billion, so based on five times the revenue — TSMC, GFS.US (GFS.US), and UMC.US (UMC.US) are also similar multiples — the value of the OEM business could reach $100 billion.

Richard talked about Intel's 18A foundry process technology, which has already brought victory to several customers, and the 18A PDK 0.9, which he said was “an important milestone in Intel's development as a foundry company.” He also said that packaging is beginning to be a differentiator, Intel added two packaging customers in the third quarter, and six more are being prepared.

IMS nano manufacturing business

Additionally, Intel has sold approximately 30% of its IMS nano-manufacturing business to two partners — Bain Capital (Bain Capital) and TSMC — with a valuation of around $4.3 billion.

Product business

Finally, Intel's product business seems to be improving, especially if the PC business rebounds in 2024 and Intel's share in the PC and server markets stabilizes. Richard wrote, “We expect Intel to regain leadership in process technology in 2025, so the server and PC market share should at least stabilize.” He pointed out that 2025 is likely to be a “strong year” for personal computers, partly due to the injection of artificial intelligence.

Richard pointed out that Intel's product business (excluding foundry, Mobileye, and Altera) generated $49 billion in revenue this year. As an independent fabric-free company, its market value could be as high as $147 billion, or about three times its revenue, not including the $90 billion in real estate, plant, and equipment on its balance sheet.