Wall Street is now more uncertain about Intel's future than ever following its tumultuous week.

• The week began with a crucial board meeting at Intel and concluded with news that Qualcomm had expressed interest in acquiring the company.
• Despite losing market share in its core business, the company continues to invest heavily in a chip manufacturing unit that is not expected to generate significant revenue until 2027.
• Despite rising 11% in performance for the week, which is their best showing since November, the shares are still 56% below their yearly target.

It was quite a week for .

The chipmaker, which has lost over half its value in the past year and month, experienced its worst day on the market in 50 years after a disappointing earnings report. On Monday, the company announced that it would separate its manufacturing division from its core business of designing and selling computer processors.

On Friday, CNBC reported that Intel had recently approached Qualcomm about a possible takeover, which could be one of the largest tech deals in history. However, neither company has confirmed if any discussions have taken place. The Wall Street Journal first broke the news.

Since November, the stock had its best weekly performance, rising 11%.

Despite the rally, CEO Pat Gelsinger remains unrelieved as Intel has faced challenges since he took over in 2021. The company lost its position as the world's largest chipmaker and was beaten in artificial intelligence chips by Nvidia, which is now valued at almost $3 trillion, over 30 times Intel's market cap of $90 billion. In August, Intel announced it would cut 15,000 jobs, or over 15% of its workforce.

Intel is remaining an independent company with no plans to spin off the foundry, as per Gelsinger's statement in a memo to employees on Monday. He emphasized that the two halves are better together, while also setting up a separate internal unit for the foundry with its own board of directors and governance structure, and the potential to raise outside capital.

Intel faces two significant challenges as it tries to revive its business: investing over $100 billion in building chip factories in four different states and capturing a share of the AI market that is shaping the future of technology.

Intel plans to spend approximately $25 billion this year and $21.5 billion next year on its foundries in an effort to convince U.S. chipmakers to onshore their production rather than relying on Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung.

If Intel's core business was performing optimally, Wall Street would find that prospect more appealing. However, despite being the primary supplier of processors for PCs, laptops, and servers, Intel is losing market share and experiencing revenue declines that endanger its cash flow.

'Next phase of this foundry journey'

Last weekend, the board convened to address the increasing difficulties and devise a strategy for the company.

Intel announced that it has seven products in development and landed a giant customer, who will use its foundry to produce a networking chip. The company's Monday announcement on the new governance structure for the foundry business served as an opening salvo to convince investors that serious changes are underway as the company prepares to launch its manufacturing process, called 18A, next year.

"Gelsinger emphasized the importance of saying "we're moving to the next phase of this foundry journey" in an interview with CNBC's Jon Fortt. He explained that in this next phase, the focus is on building efficiency and ensuring good shareholder returns for the significant investments made."

Intel's foundry bet will not yield significant returns for several years, according to a memo. The company anticipates that it will not see substantial sales from external customers until 2027. Additionally, Intel plans to halt its fabrication operations in Poland and Germany for approximately two years based on projected market demand. The company will also delay its plans for its Malaysian factory.

TSMC is the dominant player in the chip fab industry, providing manufacturing services to companies such as Nvidia, Apple, and Qualcomm. Its technology enables fabless companies to produce more powerful and efficient chips than what can be achieved at scale within Intel's factories. Even Intel relies on TSMC for some of its high-end PC processors.

Gelsinger stated that Intel hasn't disclosed a major American semiconductor client for its foundry yet, but to remain vigilant.

"Gelsinger informed Fortt that some customers are hesitant to provide their names due to competitive dynamics, but there has been a significant increase in customer pipeline activity."

Backed by the government

Currently, the U.S. government is Intel's biggest advocate, intensely working to ensure domestic chip production and reduce the company's dependence on Taiwan.

Intel has been awarded $3 billion to manufacture chips for military and intelligence agencies in a top-secret facility known as a "secure enclave." Although the program is classified, Intel has not disclosed any further details. Recently, Intel CEO Pat Gelsinger met with Commerce Secretary Gina Raimondo, who is actively promoting Intel's role in the future of chip production.

Intel received up to $8.5 billion in CHIPS Act funding from the Biden administration and could obtain an additional $11 billion in loans from the legislation, which was enacted in 2022. However, none of the funds have been disbursed yet.

According to Anthony Rapa, a partner at Blank Rome who specializes in international trade, policymakers aim for a flourishing American semiconductor industry in the country.

Intel's biggest customer is still itself, as the company began reporting the finances of its foundry division this year. In the latest quarter, which ended in June, the division had an operating loss of $2.8 billion on revenue of $4.3 billion. Only $77 million in revenue came from external customers.

By 2030, Intel aims to generate $15 billion in revenue from external foundries.

Gelsinger stated that the week's announcement was not only a step towards a sale or spinoff but also aimed to attract new customers who were worried about their intellectual property being exposed to Intel's other businesses.

"According to JPMorgan Chase analysts, who have given Intel a sell rating, the company believes that the new separation will give external foundry customers/suppliers more clarity. This could potentially result in a spin out of the business in the near future."

The PC chip division of Intel's client computing group experienced a 25% decline in revenue from its peak in 2020 to last year. Additionally, the data center division saw a 40% drop in revenue over the same period. In 2023, server chip volume decreased by 37%, while the cost to produce a server product also increased.

Intel has integrated AI technology into its processors in an attempt to boost sales of new PCs. However, the company still lacks a strong competitor in the AI chip market, which is currently dominated by Nvidia's GPUs. According to Daniel Newman of The Futurum Group, Intel's Gaudi 3 AI accelerator only contributed approximately $500 million to the company's sales last year, in comparison to Nvidia's $47.5 billion in data center sales in its most recent fiscal year.

Intel investors, like Newman, are questioning where the company will go next.

"What made them strong was that they did everything."

— CNBC's Rohan Goswami contributed to this report

WATCH: CNBC's full interview with Intel CEO Pat Gelsinger