Intel Faces Ongoing Struggles Despite Nvidia’s $5 Billion Investment

Intel may have gained a short-term boost from Nvidia’s surprise $5 billion investment, but its biggest challenge still looms: fixing its struggling contract chip manufacturing division. While the deal fueled optimism on Wall Street, analysts say it does little to resolve Intel’s core issues.

Nvidia’s Stake Brings Buzz, but Not a Solution

Nvidia announced it would acquire a 4% stake in Intel as part of a strategic partnership. Under this agreement, Nvidia will use Intel CPUs in its AI data center servers, while Intel will integrate Nvidia’s AI technologies into its upcoming PC chips.

However, the deal does not include Intel Foundry Services (IFS)—Intel’s contract chipmaking arm launched in 2021 to build chips for outside customers. This omission raised eyebrows because IFS has become central to Intel’s long-term strategy, U.S. national security goals, and investor concerns.

Intel Foundry Services Is Bleeding Cash

Intel created IFS to revive the company as its product business lost ground to competitors. The plan involved spending hundreds of billions of dollars on new factories, betting on demand from other tech giants.

But customer interest never reached expectations. IFS reported $13 billion in losses in 2024, up from $7 billion in 2023, which contributed to Intel’s stock plunging by 60% last year. Former CEO Pat Gelsinger, who championed the foundry push, was removed by the board in December as confidence waned.

Analysts now warn that the foundry division remains Intel’s biggest risk. Some advocate selling it, while others argue that would raise Intel’s production costs by removing its economies of scale. As CFRA analyst Angelo Zino explained, “This is a business that will continue to bleed cash at least through 2027.”

National Security Stakes Add Pressure

Intel’s manufacturing future also carries national security implications. It remains the only large-scale, leading-edge U.S. chipmaker and supplies chips to the Department of Defense.

Currently, most advanced chips come from Taiwan’s TSMC, which poses a risk given geopolitical tensions and the possibility of a Chinese invasion of Taiwan. Although TSMC is expanding in the U.S., most of its capacity and critical research remain in Taiwan. For that reason, Intel’s survival is strategically important to the U.S. government, which has also taken a 10% stake in Intel.

No Foundry Commitments From Nvidia

At a press conference about the partnership, Intel and Nvidia’s CEOs did not announce any manufacturing deals with IFS. Instead, they confirmed plans to partner with rival TSMC for producing new chips.

Analyst Anshel Sag noted his surprise, saying he expected Nvidia to place some contract manufacturing orders with Intel, possibly with U.S. government involvement, to diversify away from TSMC.

Credibility Boost Without a Turnaround Plan

Even though this deal focuses only on Intel’s product division, Zino believes it still boosts Intel’s credibility in the industry, which could indirectly benefit the foundry side.

He added that Nvidia might eventually test Intel’s foundry services with small “token” projects. However, unless major customers sign on soon, Intel’s manufacturing woes will likely continue to overshadow its recent wins.