To The Moon

"Incompetent management, rotten culture, zero moat. It’s a broken company."

In December 2024, a former Intel engineer posted this blunt assessment on social media, urging everyone to stay far away from the stock.

He had lived through Intel’s most turbulent years, watching the company burn tens of billions of dollars in cash flow on mediocre acquisitions and endless high-level infighting. He knew, far better than any Wall Street analyst, that Intel's core issue wasn't a lack of market demand. It was a failure of execution, rotten to the core.

Fast-forward to today.

Intel has just dropped a disastrous earnings report: hitting a hard ceiling on the supply side, facing severe substrate shortages, and suffering a tragic accident that halted production at a key factory.

The stock plummeted nearly 30% in a single day.

Yet, while the crowd scrambled for the exits, that same former engineer—the one who had warned everyone to run—did something unexpected: he bought Intel 2028 call options (Leaps) and decided to hold on.

His move captures the stark, fascinating paradox of Intel.

The Two Faces of Intel

"Intel is actually two completely different companies."

One designs processors for servers and PCs; the other is a capital-intensive wafer foundry, desperately burning cash to catch up with TSMC.

For the last decade, both of these companies have been a mess.

On the design side, CPU architectures lagged. On the manufacturing side, process delays and glacial yield-curve improvements plagued the fabs.

But the biggest culprit was management. From Brian Krzanich to Bob Swan, and later Pat Gelsinger, Intel never suffered from a lack of talented engineers or capital. It suffered from a severe lack of vision and execution. They spent fortunes buying Mobileye and Altera, which ultimately served as incredibly expensive lessons.

That’s what the engineer meant in 2024: the demand was there, but the execution was broken.

But now, the second face is finally changing.

With a heavy turnaround push and figures like Lip-Bu Tan previously pressing for radical restructuring, the company has finally begun "scraping the bone to heal the poison." Unproductive legacy management has been cleared out, and the focus has shifted from blindly chasing market share to clawing back profitability.

Crucially, things in the fabs are actually looking up. The 18A process node—repeatedly doubted by the market—is finally showing tangible yield improvements.

A Slap in the Face, and a Sovereign Backstop

This latest brutal earnings report was a loud, painful wake-up call.

Over the past few months, the market had quietly priced in a "smooth recovery" narrative, assuming that a new strategy and government subsidies would effortlessly pull Intel out of the mud.

Instead, management delivered a harsh reminder: the legacy rot runs deep, and recovery will not be a straight line. The issues to resolve are far more systemic than Wall Street estimated.

But does this change the underlying investment thesis for Intel? Not really.

Investing in Intel was never about betting on a flawless balance sheet. It is, and has always been, the ultimate geopolitical wildcard.

Here lies the Intel paradox:

At the corporate level, it remains flawed, with execution that needs constant, rigorous scrutiny. But at the national level, it is simply too important to fail. It is the crown jewel of the U.S. government’s domestic semiconductor strategy—a sovereign "too big to fail" backstop.

Betting on a Nation, Not on Perfection

The semiconductor industry has no shortage of stellar companies. TSMC has flawless execution, Nvidia has an unbreakable moat, and Broadcom has a masterclass CEO in Hock Tan.

But Intel offers a completely different wager: it is the last, best hope for American semiconductor manufacturing.

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