03:54 PM EDT, 10/13/2025 (MT Newswires) -- Intel's ( INTC ) fundamentals continue to be "challenged" despite a recent surge in its stock value on the back of new deals, BofA Securities said in a note e-mailed Monday.

In August, the chipmaker said the US government agreed to acquire a 9.9% stake in the company, as part of an $8.9 billion investment deal with the Trump administration. Last month, Nvidia ( NVDA ) agreed to invest $5 billion in Intel ( INTC ) and jointly develop new data center and personal computer chips.

Intel's ( INTC ) shares were up 1.8% in Monday late-afternoon trade, taking its year-to-date rally to about 85%.

The recent stock surge "more than reflects" Intel's ( INTC ) improved balance sheet and external foundry potential, BofA analyst Vivek Arya said in a note to clients. The company's competitive outlook "remains challenged, with no discernible (artificial intelligence) portfolio/strategy, uncompetitive server (central processing unit), and less flexibility now versus before in divesting loss-making manufacturing."

The brokerage downgraded its rating on the Intel ( INTC ) stock to underperform from neutral, with a $34 price objective.

"We believe (the) US (government's) intervention requires (Intel ( INTC )) to remain committed to manufacturing, regardless of its profitability," Arya wrote. "The (Nvidia ( NVDA )) partnership improves (Intel's ( INTC )) enterprise AI positioning, but lack of an accelerator product keeps upside limited."

Intel ( INTC ) has struggled in gaining market share in both PC and server CPUs against Advanced Micro Devices ( AMD ) and Arm Holdings ( ARM ) , BofA said. The brokerage sees Intel ( INTC ) potentially slowing down the pace of the CPU share losses, but not regaining the lost market share in the "foreseeable future."

The company's foundry business is "unsustainable" on its own without the internal Intel ( INTC ) products customer, according to the note.

"Even if Intel Foundry maintains its internal customer and potentially lands substantial external customer revenue, we estimate the foundry to remain unprofitable on both gross-profit and operating-profit bases by (2027)," Arya wrote. "Only with ($15 billion to $20 billion) in external foundry revenue, we estimate the business to be profitable on a gross-profit basis, though still could be unprofitable on an operating-profit basis."

The brokerage counts the US government backing and potential for wins in packaging among the tailwinds for Intel ( INTC ), according to the note.

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