Intel Corporation (INTC) saw its shares decline 0.8% to $107.04 on Thursday, as the stock struggled to hold onto gains from earlier in the week. The decline came amid a broader selloff in semiconductor stocks, with the Philadelphia Semiconductor Index plunging 3.6% and the S&P 500 technology sector officially entering correction territory.
The main catalyst for Intel's recent volatility has been a report from The Information that Alphabet's Google has placed an order for more than 3 million tensor processing units (TPUs) to be built by Intel and delivered in 2028. TPUs are custom chips designed by Google for artificial intelligence workloads. However, Reuters reported that it could not independently confirm the story, and neither Intel nor Alphabet have commented on the matter.
Investors are closely watching the potential deal as a sign of progress for Intel's foundry business, which manufactures chips for external clients. The company's foundry arm has been a key focus under CEO Lip-Bu Tan, who is steering Intel toward AI computing, CPUs, and advanced packaging. However, the foundry division remains deep in the red, reporting $5.421 billion in revenue but an operating loss of $2.437 billion in the first quarter.
Broader market pressures weighed heavily on chip stocks Thursday. According to Reuters, investors engaged in profit-taking amid concerns over high valuations, inflation, and geopolitical tensions related to U.S.-Iran relations. Nvidia (NVDA) and Broadcom (AVGO) were among the biggest decliners in the Philadelphia Semiconductor Index.
The reported Google order has fueled optimism that Intel could gain traction with external foundry clients at a time when demand for AI chips is outpacing the capacity of Taiwan Semiconductor Manufacturing Co. (TSM), the current leader in advanced chip manufacturing. Jacob Bourne, technology analyst at eMarketer, noted that the interest from AI giants highlights a push to diversify a supply chain heavily concentrated with TSMC.
Intel's first-quarter results showed revenue of $13.6 billion, up 7% year-over-year, with Data Center and AI revenue rising 22% to $5.1 billion. The company's Q2 outlook calls for revenue between $13.8 billion and $14.8 billion and non-GAAP EPS of $0.20. However, the stock's performance increasingly hinges on whether interest from hyperscalers like Google and Nvidia translates into signed foundry deals.
In a separate development, Cadence Design Systems announced an expanded partnership with Intel Foundry to develop process design kits (PDKs) for Intel's next-generation 14A manufacturing node. Naga Chandrasekaran, Intel Foundry's EVP and general manager, said the collaboration underscores the company's commitment to its technology roadmap. Foundry customers rely on such design tools to ensure reliable chip production.
Despite the positive signals, Intel faces significant risks. The company warned in its Q1 filing that if it does not secure enough committed demand for the 14A node from external customers and its own products, it could pause or halt work on that and future nodes. The Google order, if confirmed, would not generate volume until 2028, leaving Intel's foundry ambitions in a precarious position in the near term.
