Tower CEO: "Intel is definitely a competitor now"
Two years after Intel’s aborted $5 billion bid, Tower’s CEO Russell Ellwanger explains how continued investment in silicon photonics turned a would-be acquirer into a rival, and why the company believes its AI-driven growth is structural, not hype.
“A few weeks ago, I went down to lunch in the Tower cafeteria and started talking to two employees sitting at the other end of the table,” Russell Ellwanger, Tower’s CEO, recalls in an interview with Calcalist. “I asked them: How do you feel? What do you think of the company? And their answer was: ‘Look at the stock price. I come home in the evening and my whole family, even my neighbors, talk to me about Tower stock. They think I’m someone special.’”
With these words, Ellwanger, who has run the company for two decades, describes the atmosphere now prevailing at Tower.
Anyone who thinks the northernmost outpost of Israel’s AI revolution is Nvidia’s headquarters in Yokneam has probably not been following the performance of the chipmaker based in Migdal HaEmek. Tower’s share price has surged 113% since the beginning of 2025, and it is now trading at a higher earnings multiple than Nvidia.
Tower’s current market capitalization of NIS 44 billion places it seventh among all companies listed on the Tel Aviv Stock Exchange, just behind Teva, Elbit Systems, and the major banks. On Wall Street, where Tower is valued at approximately $13 billion, it is surpassed, among Israeli companies, only by Teva, Elbit, Check Point, and CyberArk.
Nevertheless, Ellwanger is convinced that Tower can go much higher. Most of the company’s employees hold shares, and while three years ago many regretted Intel’s decision to cancel its planned $5 billion acquisition of Tower, following opposition from Chinese regulators, today, they increasingly view that outcome as the best thing that could have happened to them.
For years, Tower was seen as something of a boutique chipmaker, specializing in analog chips for niche applications that did little to excite the broader industry. But Ellwanger and his engineers came to realize that the company had a meaningful role to play in the AI revolution. With the release of its latest financial results, Tower announced a $300 million investment to expand its silicon photonics production lines, in addition to a $350 million investment in the field announced earlier this year.
For those who understand the infrastructure underlying artificial intelligence, the message was unmistakable: this was Migdal HaEmek’s battle cry to the AI universe. Indeed, much of Tower’s recent stock rally followed that announcement.
Silicon photonics chips are now essential in data centers, as traditional copper interconnects can no longer handle the volume of data flowing through the GPU processors that power AI applications. The industry is shifting toward light-based (photonic) solutions, which enable far higher transmission speeds while consuming less electricity, an issue that has become one of the most acute bottlenecks in AI today.
Is what happened to Tower’s stock a sustainable development that could matter over the long term, or have you simply learned to say the right words to investors, AI and data centers?
“It’s not only sustainable; we have significant additional growth ahead of us, and I’m not trying to inflate the stock,” he says. “I’m simply talking about the company’s performance and the volumes of silicon photonics products we are producing, which are only increasing. After the expansion of our production capacity in this area, an expansion we announced and which will be completed in the first half of 2026, with most of the equipment already installed and awaiting approvals, we will be able to triple revenues from this activity.
“That means we will reach close to $1 billion in annual revenue from AI-related activity alone, strengthening and sharpening our position as a company that enables very high-speed data movement inside data centers. This capability is a prerequisite for artificial intelligence, and most of the major integrators in the field are already our customers. Our main challenge today is simply to maintain those relationships and continue to grow.
“I believe the future is very bright. And again, I can’t comment on the stock price itself, but I do expect our business momentum to continue to build. We will soon be announcing a new financial model, and while I don’t want to go into details at this stage, I can say that it reflects continued growth.”
“There’s no reason we shouldn’t be one of the five largest companies on the Tel Aviv Stock Exchange”
Even before completing the expansion of its production capacity for data-center chips, Tower provided guidance for record quarterly revenue of $440 million in the fourth quarter, putting full-year 2025 revenue at $1.5 billion. That would represent annual growth of 14%, an acceleration from the single-digit growth rate reported in the third quarter. Although Tower is a hardware manufacturer, it enjoys relatively high profitability, which is expected to approach $200 million in the annual results.
So you don’t think Tower today is part of the AI bubble?
“I’m not an analyst, and I think most of them are wrong most of the time, but I don’t think this is hype,” he says. “What’s happening in data centers today, the need for higher speeds and greater computing power, is real. There’s a transition from previous platforms to photonics-based platforms, which currently have only 20%-30% adoption but will eventually reach 90%-100%.
“The addressable market for what we’re doing today is likely to triple. I can’t say whether current valuation levels represent a bubble or not, but I do know that AI is changing the world, and it’s not going to stop anytime soon. I know that my grandchildren are growing up in a very different world than the one I experienced as a child. By the way, I’m not sure that’s a good thing, and I’m not saying it’s a bad thing either. It’s just different.”
By the end of 2026, what proportion of Tower’s revenue will come from data center products?
“Probably 40% to 45%. The beauty of the projects we’ve done in this space is that almost all of them are expansions, capacity increases rather than greenfield builds. That means once everything is ready and approved, our customers, companies that build server farms, can place orders immediately, without having to re-qualify the platform with their end customers. As a result, we can begin producing with the new capacity as early as the second half of 2026.”
For this type of expansion, do you receive any subsidies, such as under the U.S. CHIPS Act?
“At this point, none of these expansions are subsidized by any government. That could change. We are looking at some expansion at our factories in Japan, and we will probably try to secure a government grant there. Most of the current expansion, by the way, is at our plant in Migdal HaEmek, which will have the largest silicon photonics production capacity and will receive a significant portion of the $650 million investment we announced. But in Israel, it is very difficult to obtain grants,” Ellwanger adds, offering a pointed hint to the government.
Turning to Israel, how important is it for you to continue trading on the Tel Aviv Stock Exchange? With a market value of more than $10 billion and repeated references to AI and data centers, you could already attract the attention of major U.S. institutions.
“We have no plans to delist from Tel Aviv. Tel Aviv has been very good to us. When I arrived, I don’t think we were even among the top 50 stocks, and two months ago we reached the top 10. Today, I see no reason why Tower shouldn’t become one of the five largest companies on the exchange. We have long-term institutional investors here who are very good for the company and who have held their shares for many years.
“Fortunately, we are now also a very well-known name in the United States, and many U.S. institutional investors have come in as well, which is the main reason for the recent jump in the stock. But there’s an American saying: ‘Make new friends, but keep the old. One is silver, the other is gold.’ The investors in Tel Aviv are the ones who carried us in the early years.”
Are you planning to raise capital now that the stock price is high?
“No, not at all. We have $1 billion in net cash to fund further expansion, and we also generate strong cash flow. There is no intention to carry out a transaction that would dilute shareholders.”
“I don’t think we lost a customer because Tower is Israeli”
To what extent has Tower’s Israeli identity affected contracts and day-to-day operations over the past two years of war, particularly as a company based in the north?
“Even during the worst days of the war, with missiles coming from Lebanon, we continued to ship products to all of our customers without disruption. Did some customers express concerns? Yes, a few did. But the supply chain functioned remarkably well. Tower has very few manufacturing processes that are confined to a single geographic location. If there is a problem at one plant, we can quickly shift production to another. That also allows customers to choose where they want to receive their products, from the U.S., from China, or with no preference at all. I also don’t believe we lost a single customer because Tower is an Israeli company.
“Some customers worry about the United States, others about China. What matters is that the company remains apolitical. That’s also why we ultimately decided not to build a factory in India, even though we came very close and the deal there was extremely attractive. During the negotiations, questions emerged about whether the terms aligned with our ethical standards, and those concerns were reinforced by side letters attached to the draft agreements. The project was too closely tied to the local government. People can call me naïve or a poor leader if they want, I can live with that. But no one can say that I’m dishonest.”
Ellwanger is referring to negotiations held roughly a year ago to establish a semiconductor plant in India, a project that would have involved a $10 billion investment from the Indian government and the Adani Group. As in Israel, an Indian minister even tweeted about the factory’s establishment, but Tower never formally announced the project and ultimately did not sign the agreements.
Now that India is off the table, and given your strong cash position, including the $350 million you received from Intel after the canceled acquisition, are you considering acquisitions?
“We’re always evaluating acquisitions or expansion opportunities. Acquiring additional manufacturing capacity is not currently on the agenda, but there are specific technical capabilities we’re interested in, and we have the cash to pursue them.”
And on the flip side, are you receiving acquisition offers?
“I think Tower would be a very attractive acquisition target today, but that’s not the direction I want to pursue at this stage.”
Is Intel, which nearly acquired Tower, now a competitor in server-farm chips?
“They are definitely a competitor. In retrospect, one of the most important things we did during the merger process was to include a clause that prevented Intel from influencing our investment decisions. During the 18 months the deal was under review, we continued to invest heavily in silicon photonics. Without that clause, Intel might have blocked those investments.”
Growth often comes with hiring. What are your plans on that front?
“We’ve always been very cautious about hiring because we don’t lay off employees. There haven’t been layoffs at Tower for many years. I believe that for employees to perform at their best, they need to feel they’re working in a stable environment, not worrying that a dip in demand this quarter or the next will put their jobs at risk. I’ve always felt it’s better to ask people to work a little harder during busy periods than to lay off colleagues during slower ones.”
You are one of the longest-serving CEOs in the Israeli tech industry, having taken the role in 2005. Are you thinking about retirement? Have you set milestones at which you would say, ‘That’s enough’?
“I do think about stepping down from the CEO role at some point, but I don’t intend to leave the company. It doesn’t have to be as chairman, it could also be as a director. But it would have to be an active role, one where I can still help make things happen.”
