Intel Corp. (NASDAQ:INTC) shares jumped over 10% Tuesday after an analyst turned bullish on the chipmaker, arguing Elon Musk’s massive Terafab project could provide much-needed scale for its foundry business.
Northland Securities analyst Gus Richard upgraded Intel from Market Perform to Outperform with a $120 price target, citing “material progress” in its turnaround, tight server CPU supply and Terafab.
The call reverses Richard’s May downgrade to Market Perform, when he suspended his price target after Intel’s sharp rally made its valuation harder to justify.
Terafab Could Address Intel’s Scale Problem
Northland said Intel’s Terafab partnership with SpaceX (NASDAQ:SPCX) and Tesla Inc. (NASDAQ:TSLA) could “materially benefit Intel’s foundry business and drive the needed scale of its process technology footprint.”
Intel’s numbers show why that matters. Intel Foundry reported $5.8 billion in second-quarter revenue but a $2.1 billion operating loss. Just $293 million came from external customers.
Intel has said the scale and pace of its 14A manufacturing expansion will depend on committed demand, including major external customer wins.
Northland Sees Terafab at 22 Million Wafers a Year
Northland estimates Terafab could eventually produce 22.4 million advanced-logic wafers a year. For comparison, it estimates TSMC currently has capacity for about 8 million wafers a year using some of the world’s most advanced chipmaking processes.
Musk has said Tesla plans to use Intel’s next-generation 14A manufacturing technology for Terafab. Reuters reported that the arrangement would make Tesla Intel’s first major 14A customer, although Intel had not confirmed the details at the time.
Musk’s companies are also major buyers of Nvidia Corp. (NASDAQ:NVDA) AI chips, but Nvidia plays a different role. Nvidia designs its chips and relies on foundries such as TSMC to manufacture them, while Intel operates its own fabs and develops manufacturing processes such as 14A.
Nvidia has a roughly 80% chance of ending the year as the world’s largest company by market value on Polymarket, in a market with about $7 million traded.
Not all of Terafab’s planned production would necessarily run through Intel-owned factories. But if Musk builds part of the project around Intel’s 14A process, it could create substantial demand for the technology and give Intel an important outside customer as it tries to scale its foundry business.
Intel Has More Than One Tailwind
Richard also sees Intel benefiting from a shortage of server CPUs, which could give the company more pricing power. That comes as DigiTimes reported Intel is considering raising PC processor prices by about 10% in October.
Intel is also making progress on the manufacturing technology behind its foundry push. The company said Tuesday that it has processed more than one million wafers using ASML’s next-generation High NA EUV technology.
Counterpoint Research has previously called Terafab a major credibility boost for Intel Foundry, arguing that a project of that scale could make it easier to win other large customers.
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