Intel Corp

Intel represents a critical entity in domestic semiconductor fabrication, making the reshoring of semiconductor manufacturing an essential priority for the United States. The primary alternative provider in this sector is TSMC, which commands the vast majority of advanced nodes globally. It is improbable that TSMC will relocate most of its critical manufacturing infrastructure to the United States, as this capacity serves as a strategic deterrent against potential intervention by China. Although an investment in Intel may appear inconsistent with prior observations regarding an impending data center bubble, a strategic rationale supports the decision. The success of Intel appears to be a necessary outcome.

Intel Corporation is experiencing robust demand in data center and AI markets, leading to a notable improvement in profitability. The manager highlights that Intel's cloud ASIC business is highly profitable, with margin gains and operating leverage set to enhance overall earnings power. The upcoming product roadmap and foundry strategy are gaining traction, indicating further upside in earnings and valuation. The manager believes that Intel is progressing beyond a cyclical recovery toward a structurally stronger, AI-driven growth story, supported by its ecosystem and the increasing exposure to AI workloads.

Intel Corporation has been highlighted as one of the top performers in the Russell 1000 Value Index, with a year-to-date return of 278% and a trailing P/E ratio of 95x. However, the commentary reflects a broader market context where the Oakmark Fund has chosen not to invest in AI hardware stocks, including Intel, due to uncertainty about future cash flows and the sustainability of current profit margins. The manager notes that while Intel is viewed as a beneficiary of AI spending, they have not found sufficient margin of safety in its valuation to justify ownership.

The primary engine behind the S&P's gains in H1 was the semiconductor complex. More than a third of the index's H1 gains came from a handful of top performers, including Intel. A global supply bottleneck in memory chips — essential inputs for AI data centers — drove the move: as these companies sold out their production capacity, pricing power surged and earnings estimates were revised sharply higher. This positions Intel favorably within the growing AI sector, highlighting its potential for continued earnings growth.

Intel has shown significant momentum with a year-to-date return of +278% through June 30, 2026. This performance is indicative of its strong positioning within the semiconductor sector, particularly as it relates to the AI infrastructure buildout. The recent rotations out of software stocks and into hardware stocks further highlight Intel's potential as a key player in this evolving market landscape. The company's growth trajectory suggests it is well-positioned to capitalize on emerging trends in technology.

While the market viewed Intel as a legacy chipmaker, we saw a strategic manufacturing asset with a credible foundry turnaround. Our focus is on the infrastructure capacity required to support AI deployment, where demand is visible, supply is constrained and earnings revisions continue to improve. Intel Corporation is a key player in this space, and we believe its position will strengthen as the semiconductor complex rebounds.

The letter discusses the competitive landscape in the AI supply chain, mentioning that Intel is one of the companies contracted by top cloud compute providers to provide alternative chipsets. However, it does not provide a specific investment thesis or directional argument regarding Intel's future performance.