Shareholders of Intel (INTC -2.40%) are going through a stressful time; shares have fallen to a five-year low despite the company's role as one of the world's leading semiconductor companies. The stock's plunge stems from Wall Street's concerns over Intel's aggressive manufacturing plans at a time when the economy is shaky and the industry could hit a downturn.

Leaning into uncertainty with hefty spending plans is a bold strategy, but success could bring a new age of growth to the semiconductor giant. However, investors might need patience to see this through; here is what you need to know.

A bold bet on manufacturing

Intel is just getting underway with a massive plan to invest billions of dollars over the next several years to revamp its fabrication (semiconductor manufacturing) operations. The company could spend more than $100 billion when it's all said and done, including expansion projects in Arizona, new facilities in Ohio, and various projects throughout Europe.

Capital expenditures are ramping up, wiping out the company's free cash flow. In other words, Intel has no cash profits because it's spending them on these new facilities. These projects won't be operational until later this decade, so Intel is investing significant money without immediate return.

INTC Free Cash Flow Chart.

INTC Free Cash Flow data by YCharts.

Understandably, the big question is: What happens if a downturn in business causes Intel's revenue to drop, forcing it to either slow its spending or borrow to maintain its plan? Investors are taking a leap of faith that Intel's investments will reward them over the long term and that the business remains in good financial shape while it builds out these projects.

A big partnership struck

Intel recently struck a deal with Brookfield Infrastructure Partners on a co-funding partnership. The deal is worth up to $30 billion and will help fund two of Intel's new fabrication facilities. Brookfield's investment buys it a 49% stake in the facilities; Intel will exclude Brookfield's share of the factories' profits from its earnings but maintains majority ownership of the factories, intellectual property, and operational control.

Ultimately, Intel is trading a piece of its long-term profits in exchange for taking some of the financial burdens of construction off its shoulders. This deal and subsidies from the recently signed CHIPS bill could offset as much as 30% of Intel's capital investments over the next five years.

It's a hybrid approach; the new facilities will help Intel compete with foreign semiconductor manufacturing powerhouses like Taiwan Semiconductor. The potential offsets from subsidies and the funding partnership help Intel do it in a way that might not break the bank, though the investments are still tremendous by any measuring stick. Management has said that it may strike other funding deals on its global projects.

Keeping the balance sheet intact

Semiconductors are a cyclical business that can have sharp declines when the economy suffers; recent struggles by industry peers suggest that the industry could be facing a downturn. Intel's balance sheet is vital to keeping the business healthy while balancing these large projects.

Intel has built up a healthy cash balance of more than $27 billion, leaving the company with just $8 billion in net debt. Investors should watch the company over future quarters to track how much it depletes that cash pile. Still, the company is on solid footing right now, even if the semiconductor industry stalls out.

INTC Cash and Short Term Investments (Quarterly) Chart.

INTC Cash and Short Term Investments (Quarterly) data by YCharts.

It's unclear whether Intel can build up its manufacturing operations without sacrificing existing obligations like its dividend, which cost the company $5.8 billion over the past year. Remember that dividends are a cash expense, so if free cash flow falls below that, the payment comes from Intel's balance sheet. Management seems intent on keeping the payout intact, so investors should perk up and look for trouble if Intel reverses course and cuts the payout in the future.

Wall Street doesn't like uncertainty, and Intel's massive investments create what could be several years of mystery about whether its large bets will pay off or not. An economic downturn could mean more pain for Intel and other semiconductor companies, so investors should probably remain cautious and build a position slowly.