The Nvidia-Intel Foundry Deal That Never Was: What This Means for the Chipmaking Giant

Intel’s turnaround narrative has generated significant investor enthusiasm in recent months, fueled by government backing, strategic capital injections, and fresh leadership under CEO Lip-Bu Tan. However, beneath the surface optimism lies a potentially critical development that could undermine the entire foundry strategy. When Nvidia chose not to move forward as a manufacturing partner for Intel’s advanced 18A process, it dealt what many observers view as a significant blow to the chipmaker’s ambitious reinvention plan.

The Foundation of Intel’s Future: The Foundry Business

Intel’s path to revival rests fundamentally on transforming itself into a world-class contract chip manufacturer—a role currently dominated by TSMC and Samsung. To compete in this arena, the company established Intel Foundry Services back in 2021 and has invested billions of dollars in building out state-of-the-art manufacturing capabilities. The centerpiece of this effort is the 18A process, representing a cutting-edge 1.8 nanometer node capable of producing the most advanced semiconductors available.

The company recently commenced mass production on the 18A platform, marking a critical inflection point. During recent earnings communications, CEO Tan struck an optimistic tone, noting steady progress and improving yields as the company ramps capacity to meet what management characterizes as robust customer demand. On the surface, this narrative supports the bullish case for Intel’s foundry ambitions.

When the Rubber Met the Road: Nvidia’s 18A Assessment

Yet reality painted a different picture when Nvidia—the most prominent beneficiary of the artificial intelligence boom—tested Intel’s 18A capabilities and subsequently decided to decline moving forward with the chipmaker as its manufacturing supplier. According to reporting from Reuters around the close of last year, Nvidia made this determination after evaluating the technology firsthand. The specific technical rationale remains opaque, though industry analysts speculate about potential yield concerns or other manufacturing performance issues.

This decision carries substantial symbolic weight. Nvidia holds a $5 billion equity stake in Intel that was established in the fall of 2024, creating obvious financial alignment between the two companies. Investors might reasonably have assumed such a material investment would include a commitment to utilize Intel’s manufacturing services. No such guarantee existed, however, and Nvidia’s decision to look elsewhere effectively demonstrates that even with skin in the game, the chipmaker was not prepared to back its infrastructure with actual business.

The Setback: Missing the Marquee Customer

For Intel, securing Nvidia as an 18A customer would have represented a watershed moment—not merely capturing revenue, but validating the entire foundry concept to skeptical markets and competitors. Instead, the company remains without any major external customer willing to commit production volume to the new process. Broadcom had previously been exploring the 18A pathway as well, though the current status of that relationship remains unclear.

The market’s initial reaction proved notably muted. When the news surfaced around year-end, Intel shares dipped roughly 4% before recovering most losses by session close. This relative indifference masks a concerning reality: Intel has no meaningful proof points that external customers view 18A as production-ready and competitive. The absence of such validation raises uncomfortable questions about whether the foundry strategy can achieve its financial objectives.

What This Implies for Investors and the Path Forward

The trajectory for Intel’s stock appears more precarious than recent rallies suggest. The company’s shares have approximately doubled over the past six months, yet this appreciation rests on faith in an unproven foundry business model. Until Intel demonstrates the ability to win and retain major customers for 18A manufacturing, investors should exercise considerable caution regarding exposure to this stock.

The stakes for Intel are enormous. Successfully establishing itself as a trusted third-party chipmaker alongside TSMC and Samsung remains achievable, but the window to prove capability is narrowing. Each failed customer interaction—whether due to technical limitations, cost considerations, or schedule slippages—compounds the challenge. Nvidia’s reluctance to commit represents not merely a single lost opportunity, but a warning signal about deeper competitive deficiencies.

For equity investors considering a position in Intel at current valuations, this reality warrants substantial reflection. The company faces a crucial inflection point where near-term execution on foundry customer acquisition will likely determine the ultimate success or failure of its entire transformation narrative.