Layer: L5-Foundry-Specialty Screened: 2026-05-28 Analyst: Claude (claude-sonnet-4-6) Data sources: yfinance (price/financials), Finnhub (supplemental), public SEC filings, investor day press releases
| Metric | Value | Threshold |
|---|---|---|
| Current price | $81.55 | — |
| 52w Low | $31.62 (2025-08-11) | — |
| 52w High | $89.96 (2026-05-26) | — |
| YTD return | +120.0% | >80% gate |
| Distance from 52w high | -9.8% | >-10% gate |
Result: FULL SCREEN — YTD >80% but just outside -10% of high (at -9.8%). Both conditions must be met for abbreviated; the -9.8% barely misses the -10% threshold.
Context on YTD move: GFS participated in the broad mature-node foundry re-rating of 2026. UMC (the closest pure comparable) is up +183.4% YTD; TSM is up +32.6%. GFS is actually the laggard in this cohort, not the leader. The stock spent most of 2025 under $45 (bottomed at $31 in Aug-25), recovering only after Q4-2025 earnings (Feb 2026 beat) and the May 2026 Investor Day (first dividend announcement, $375M quantum foundry award). The 120% YTD is from a severely depressed Jan-2026 base.
GFS is the only US/EU pure-play specialty foundry at scale (14K employees, ~$7B revenue). Unlike TSMC or Samsung, GFS permanently exited leading-edge (< 7nm) in 2018, focusing entirely on specialty process nodes: RF, FDX (Fully Depleted Silicon-on-Insulator), SiGe (Silicon-Germanium), photonics, and power.
| End Market | Q1 2026 % | FY2025 % | YoY trend |
|---|---|---|---|
| Smart Mobile Devices | 34% | 39% | Declining share |
| Automotive | 23% | ~21% | +24% YoY — RECORD $1.4B FY2025 |
| Home & Industrial IoT | 16% | 18% | Includes aero/defense |
| Communications Infra / Data Center | 14% | 11% | +strong growth |
| Other | 13% | 11% | Includes govt/defense direct |
Key specialty platforms:
Specialty vs commodity assessment: GFS is predominantly specialty — FDX, photonics, SiGe, RF-SOI are differentiated processes with no equivalent at Chinese foundries (SMIC cannot replicate FDX or silicon photonics). The mobile/IoT base is commodity-adjacent but still uses specialty RF-SOI. The increasing automotive and comms infra mix is diluting the mobile dependency.
Assessment: Defense is a quality floor, not a growth driver. Trusted Foundry status provides moat and national security designation (protects against CHIPS Act renegotiation risk). The 6% YoY IoT/A&D decline in 2025 reflects program timing, not structural loss.
| Award | Amount | Status |
|---|---|---|
| Main fab award (NY + VT) | Up to $1.5B | Finalized Nov 2024 — disbursing on milestones |
| Advanced packaging supplement | Up to $75M | Announced Jan 2025 — in progress |
| Quantum Foundry (proposed) | $375M | Letter of intent May 21, 2026 — NOT YET FINALIZED |
| Total potential | Up to $1.95B | — |
CHIPS Act is a tailwind, not yet a P&L contributor in material amounts. Cash balance growing from $2.1B (2024) to $3.0B (Q1 2026 incl. short-term investments) suggests initial disbursements are flowing, but the bulk remains tied to future construction milestones.
| Year | Revenue | Gross Margin | Op. Income | Net Income | EPS |
|---|---|---|---|---|---|
| 2022 | $8.11B | 27.6% | $1.26B | $1.45B | $2.69 |
| 2023 | $7.39B | 28.4% | $1.20B | $1.02B | $1.85 |
| 2024 | $6.75B | 24.5% | $0.73B | -$0.27B | -$0.48 |
| 2025 | $6.79B | 24.9% | $0.80B | $0.89B | $1.59 |
| Q1 2026 | $1.63B (ann) | 27.6% | $0.18B | $0.10B | $0.40 NI |
| Item | Q1 2026 |
|---|---|
| Cash + ST investments | $3.0B |
| Total debt | $1.72B |
| Net cash (broad) | +$1.28B |
| Net cash per share | $2.33 |
| Current ratio | 2.59x |
| Book value/share | $21.75 |
| Debt/Equity | 14.7% |
| Retained earnings | -$12.4B (IPO/pre-IPO legacy) |
Net cash positive — this is genuine: $3.0B cash exceeds $1.72B debt by $1.28B. The negative retained earnings (-$12.4B) reflect pre-IPO accumulated losses and goodwill write-offs, not ongoing capital erosion. Stockholders' equity is healthy at $11.9B.
| Year | FCF | CapEx |
|---|---|---|
| 2022 | -$435M | $3.06B (peak buildout) |
| 2023 | +$321M | $1.80B |
| 2024 | +$1.10B | $0.63B |
| 2025 | +$1.01B | $0.72B |
| # | Filter | Criterion | GFS Result | PASS/FAIL |
|---|---|---|---|---|
| 1 | Adequate size | Revenue > $1.5B | $6.79B | PASS |
| 2 | Financial condition | CR >= 2.0, net cash or manageable debt | CR 2.59, net cash $1.28B | PASS |
| 3 | Earnings stability | Positive EPS every year (10yr) | 2024 EPS -$0.48 (non-cash impair) | FAIL |
| 4 | Dividend record | Uninterrupted 20 years | IPO 2021; first div May 2026 | FAIL |
| 5 | Earnings growth | EPS ≥ 1/3 higher over 10yr | $2.69 (2022) → $1.59 (2025), -41% | FAIL |
| 6 | Moderate P/E | P/E <= 15x | Trailing 51x, forward 32x | FAIL |
| 7 | Moderate P/BV | P/B <= 1.5x (or P/E × P/B <= 22.5) | P/B 3.82x; P/E×P/B = 196 | FAIL |
Graham score: 2/7 PASS (size + financial condition)
shr-017 note: The 2/7 score is also not a cyclical-trap false positive — this is genuinely expensive relative to Graham standards. The 2022 peak earnings ($2.69 EPS) would give slightly better P/E math, but even at peak: $81.55 / $2.69 = 30x trailing — still double Graham's 15x threshold.
Formula: V = EPS × (8.5 + 2g)
| Growth Rate | Graham IV | vs $81.55 | Premium |
|---|---|---|---|
| 0% | $13.52 | -83% | 5.0x overvalued |
| 3% | $23.05 | -72% | 3.5x overvalued |
| 5% | $29.42 | -64% | 2.8x overvalued |
| 7.5% | $37.37 | -54% | 2.2x overvalued |
| 10% | $45.32 | -44% | 1.8x overvalued |
Break-even growth rate (trailing): 21.4%/yr — requires GFS to sustain 21% annual EPS growth indefinitely to justify $81.55 on trailing earnings.
| Growth Rate | Graham IV | vs $81.55 | Premium |
|---|---|---|---|
| 0% | $21.33 | -74% | 3.8x overvalued |
| 3% | $36.39 | -55% | 2.2x overvalued |
| 5% | $46.43 | -43% | 1.8x overvalued |
| 7.5% | $58.98 | -28% | 1.4x overvalued |
| 10% | $71.53 | -12% | 1.1x overvalued |
Break-even growth rate (forward): 12.0%/yr — needs 12% annual EPS growth from forward estimates to justify price. Management's Investor Day target implies 10-12% revenue CAGR and 40% gross margin by 2028. If margins expand while revenue grows 12%, EPS leverage could be significant, but this would need to be sustained for multiple years.
shr-003 gap analysis: Trailing break-even 21.4% vs forward break-even 12.0% — 9.4 percentage point gap. Market is pricing in a significant profitability inflection (from 25% margins → 40% margins), not just revenue growth. This makes the forward case less absurd, but requires full execution of the 2028 margin roadmap.
| Metric | GFS | UMC (USD-adj) | TSMC |
|---|---|---|---|
| Market cap | $44.7B | ~$7B | $2,193B |
| YTD 2026 | +120% | +183% | +33% |
| EV/Revenue | 6.4x | ~0.9x | 2.1x |
| Trailing P/E | 51x | ~37x | 36x |
| Forward P/E | 32x | ~29x | 22x |
| Gross margin | 24.9% | ~30% | ~55% |
GFS commands a 7x EV/Revenue premium to UMC — justified partly by: (a) US/EU jurisdiction premium (no China manufacturing), (b) CHIPS Act subsidy stream, (c) Trusted Foundry/defense moat, (d) silicon photonics optionality. But UMC has higher gross margins and trades at a fraction of the valuation. The GFS premium pricing assumes full execution of the 2028 roadmap. Premium over UMC has expanded dramatically with the 2026 YTD rally.
(Standard same-day check — any deterioration since thesis formation?)
| Category | Signal | Status |
|---|---|---|
| Recent price action | +120% YTD, near 52w high | RED — fully rerated, no margin of safety |
| Recent earnings | Q1 2026 beat ($0.40 vs $0.35 est, +14%); GM 27.6% +510bps YoY | GREEN |
| Q2 2026 guidance | $1.76B rev, GM 28.5%, EPS $0.43 — sequential improvement | GREEN |
| Insider activity | 3 officers selling weekly/monthly during rally; no open-market buys | AMBER/RED |
| Analyst consensus | 20 analysts: 3 Strong Buy, 8 Buy, 8 Hold, 2 Strong Sell; mean PT $78.95 | AMBER — PT BELOW current price |
| Analyst PT vs price | Current $81.55, mean target $78.95 — stock is ABOVE consensus target | RED |
| Balance sheet | Net cash $1.28B, CR 2.59, debt declining | GREEN |
| Short interest | 22% of float, 1.97 DTC — elevated but low DTC (shorts not trapped) | AMBER |
| News/catalysts | May 7 Investor Day (positive), May 21 quantum award (positive), first dividend | GREEN |
| Mubadala (77%) | No disposals — strategic owner stable | GREEN |
| Thesis deterioration? | No — but thesis was never value; it's a growth/quality story | — |
Summary: The company is operationally doing well and improving. The problem is purely valuation — the stock has rerated from its trough and is now trading above the mean analyst consensus price target. No negative fundamental developments.
VERDICT: RED — NOT A GRAHAM CANDIDATE. DO NOT ADD TO SATELLITE PORTFOLIO.
Scoring: 2/7 Graham filters pass. Graham IV at forward EPS with 10% growth: $71.53 (12% below current price). Current price $81.55 is above mean analyst PT of $78.95. Break-even growth rate of 12%/yr from forward EPS assumes full execution of a multi-year margin expansion program.
Rationale:
What would change to GREEN: GFS at $40-50 would represent 2-3x earnings, sub-1.5x book, ~15-20% forward FCF yield — that would trigger full Graham re-evaluation. Monitor for: (1) utilization rate misses, (2) automotive demand softening, (3) CHIPS Act disbursement risk, (4) Mubadala partial disposal.
What would change to AMBER: GFS at $55-65 (forward P/E ~22-26x, break-even growth 7-9% from forward EPS) — would still not pass Graham filters but the growth addendum (shr-004) becomes relevant if 10-12% CAGR guidance is credible.
VWCE note: Core VWCE provides small GFS exposure as-is. No additional satellite allocation warranted at current valuation.
VERDICT LINE: RED — GFS is a quality specialty foundry with real moats (Trusted Foundry, FDX, silicon photonics, net cash, CHIPS Act), but has fully re-rated (+120% YTD) and now trades above analyst consensus targets at 32x forward P/E with break-even growth of 12%/yr. Graham score 2/7. No margin of safety at $81.55. Re-evaluate if stock revisits $40-55 range.
Sources: yfinance (price/financials), GlobewNewsWire Investor Day release, NIST CHIPS Award, Q1 2026 SEC Filing (6-K), Q4 2025 earnings highlights, Mubadala 13G/A filing