Intel (INTC +0.97%) carries one of the stranger price tags in the market right now. The chipmaker’s net loss over the past year comes to about $11.3 billion. Its stock, meanwhile, trades at about $105 as of this writing, up more than 350% from its 52-week low of $22.78. And it costs about 62 times what the company is expected to earn on an adjusted basis over the year ahead.

A company losing billions doesn’t usually command a $550 billion market value and a premium growth multiple at the same time. The market has decided Intel’s losses aren’t what they appear, and on that point, I think the market is right.

Whether the stock is worth that price is a different matter.

Charges, not cash

The second quarter shows what the red ink is made of. Intel reported an $11.0 billion net loss for a quarter in which revenue climbed 25% from a year earlier to $16.1 billion.

Nearly all of the loss traces to a $12.5 billion non-cash, mark-to-market charge on shares Intel holds in escrow for the U.S. government under its CHIPS Act agreement. The first quarter followed the same pattern, with a $3.7 billion net loss that included a $3.9 billion goodwill impairment and another $1.1 billion escrow charge.

Set those items aside, and Intel is already profitable. Non-GAAP (adjusted) net income was $1.5 billion in the first quarter and $2.2 billion in the second.

Gross margin is climbing, too: 39.4% in the first quarter, 40.4% in the second, and management guided to 41% for the third — a steady expansion. And revenue growth accelerated, from 7% year over year in the first quarter to 25% in the second. Management’s own forecast even calls for positive earnings of $0.31 per share in the third quarter on a GAAP basis.

In other words, the swing from red ink to black is already underway.

What is 62 times buying?

The loss, then, is mostly an accounting story. The stock’s valuation is harder to explain away.

At about $105 a share, Intel trades at roughly 62 times its projected adjusted earnings for the year ahead — projections that work out to only about $1.70 per share from a company valued at $550 billion. And management’s own third-quarter guidance implies something similar. Annualize its guided $0.38 of adjusted earnings per share, and shares trade at roughly 70 times the company’s current earnings pace.

Demand isn’t the concern. CEO Lip-Bu Tan said in the company’s second-quarter earnings release that “AI is driving unprecedented demand for compute,” and the numbers back him up. Revenue in Intel’s data center and artificial intelligence (AI) segment rose 59% year over year to $6.3 billion last quarter.

Growth like that could well continue. After all, management says supply, not demand, is what limits the business right now.

But growth that has already shown up doesn’t get a stock to 62 times earnings on its own. The rest of the price rests on something that hasn’t happened yet.

Today’s Change

(0.97%) $0.99

Current Price

$103.49

Key Data Points

Market Cap

$517BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day’s Range

$101.80 – $105.97

52wk Range

$22.77 – $142.35

Volume

88.4M

Avg Vol

122.3M

Gross Margin

39.05%

The $8 billion swing

That something is the foundry. Intel’s products businesses already earn plenty. The client computing and physical AI group posted $2.3 billion of operating profit last quarter, and the data center and AI group earned $2.5 billion. Intel Foundry, the chip-manufacturing arm, gave $2.1 billion of that back — a loss pace of more than $8 billion a year.

Chief Financial Officer Dave Zinsner said last year that the foundry was on track to break even sometime in 2027, and the losses are narrowing, down from $2.4 billion a quarter earlier. Ending them would roughly double the company’s current adjusted earnings pace all by itself. Much of that swing, I’d argue, is already baked into the stock’s price.

However, the foundry is still overwhelmingly Intel’s own customer. External customers supplied $293 million of the unit’s $5.8 billion in second-quarter revenue. Intel 14A, the manufacturing process meant to win outside chip designers at scale, isn’t scheduled for high-volume production until 2028, so meaningful outside revenue may be a couple of years away.

And the spending comes first. Intel raised its 2026 capital spending outlook to more than $20 billion, expects significantly higher spending in 2027, and sold $20 billion of new stock at $95 a share this month for general corporate purposes.

The turnaround looks impressive. Revenue is accelerating, margins are expanding, and the adjusted bottom line has been positive for two quarters running.

My problem is the price. A 62-times-forward multiple leaves the stock priced for a foundry payoff that still depends on customers who mostly haven’t signed yet. Even a company executing this well can be an expensive stock, and I think Intel is one right now.

After 40 days of heavy bombing and two more weeks of daily attacks, the U.S. is now relying on a naval blockade to force Iran to fully reopen the Strait of Hormuz and return global oil markets to normalcy.

But the regime has plans to go into attack mode soon if there’s no diplomatic progress, forcing the U.S. back into major combat just as vulnerabilities have emerged in its own military.

Iran has shifted from a defensive stance to a “fully offensive” ​one, a senior Iranian official told Reuters on Monday, citing the stalemate with the U.S. on talks.

Unless the U.S. implements the June ceasefire deal in a few weeks, Iran will launch a “timely and precise” ​attack to break the blockade, the official warned.

“Iranian entities must be prepared to escalate tensions ​in the Strait of Hormuz and wider region, as Iran will be ready to make ⁠decisions and take action on difficult decisions,” the official added.

The threat comes after Iran recently reorganized its military to be more aggressive as factions in the government abandon hopes for negotiations.

Sources told The Wall Street Journal Arab intelligence detected preparations for a wider war, including the deployment of Iranian commanders, weapons, and intelligence to regional militias aligned with the regime.

Iran’s Islamic Revolutionary Guard Corps has also drawn up plans for more escalation, such as sabotaging internet cables in the Persian Gulf, fomenting unrest in neighboring states with large Shia populations, and even a potential ground assault in Kuwait, the report added.

“There is also a widespread view in Iran that the main war has not yet begun,” Mohammad Hassan Sangtarash, a Tehran-based defense analyst close to the Iranian government, told the Journal. “What we have seen so far is increasingly interpreted through the lens of ‘salami-slicing’ tactics—limited, incremental escalation designed to weaken capabilities before a larger confrontation.”

Despite seeing its conventional forces decimated by the U.S.-Israeli bombardment earlier in the war, Iran has seen its tactical situation improve recently.

Iran has developed new missiles that are better at evading air defenses, making U.S. military assets and allied oil infrastructure around the region more vulnerable.

The U.S. military has also expended much of its interceptor stockpile, which is now so low it reportedly factored into Trump’s decision to call off a major re-escalation of war.

In addition, even maintaining the naval blockade has strained U.S. forces as the U.S.S. Abraham Lincoln aircraft carrier struggles with mental health and supply issues amid a record-long time at sea. Another carrier is on the way to take its place, but other ships performing blockade operations are likely facing similar logistical concerns.

The conditions could be ripe for Iran to test U.S. resolve. And given the harm the U.S. blockade was causing, Iran wasn’t expected to stand idly by, especially now that it has more military leverage to exploit.

Majidreza Hariri, the head of the Iran-China Joint Chamber of Commerce, recently admitted the U.S. blockade will eventually inflict more economic damage than actual war.

To avoid this, he urged the regime to do whatever it takes to end the blockade, “whether through negotiation, supplication, threats, or even war.”

“We must also eliminate the perception in the U.S. that it can resort to such an action whenever it wants, and make it understand that the consequences of such a move could be severe,” Hariri added.