Intel (INTC +0.42%) stock skyrocketed yesterday on news archrival Nvidia (NVDA +1.80%) will invest $5 billion in Intel, and help its former rival "develop AI infrastructure and personal computing products" -- with Nvidia technology inside. Most investors seem confident that this event marks a turning point for Intel stock, and that brighter days lie ahead -- but one big banker is not so sure!
This morning, Citigroup downgraded Intel stock to sell. Intel stock was down 3.3% through 2:25 p.m. ET in response.
Image source: Getty Images.
Citi's the odd one out
It's worth noting that Citi seems pretty lonely in its pessimism. According to data from The Fly, at least four separate investment banks have raised their price targets on Intel since news of the Nvidia investment appeared. One banker, Benchmark, even upgraded Intel stock on the news, and set a $43 price target.
But not Citigroup.
While reluctantly raising its price target in tandem with the rising stock price, Citi complains that "investors expect that a foundry deal is upcoming," but Intel's foundry business "has a minimal chance of succeeding," reports The Fly.
NASDAQ: INTC
Key Data Points
Is Intel stock a sell?
Foundry worries lie at the heart of Citi's decision to downgrade Intel stock and, I must admit, Nvidia does have its work cut out for it if it hopes to help turn around the fortunes of its rival.
According to S&P Global Market Intelligence data, Intel's foundry business did only $17.5 billion in revenue last year, and foundry revenue has been falling for the last two years. The foundry unit also lost $8 billion in 2024 -- meaning for every $1 worth of chips Intel makes on contract for a customer, the company loses about $0.46.
It's Intel's biggest money loser by far -- and the biggest problem Nvidia must help solve.
