With valuation at extremes and execution still in question, Intel faces a high-stakes earnings test.
Intel heads into earnings this week after a sharp run-up, with shares hovering around $65. The move has been aggressive and in our view, potentially overextended in the near term. We saw this unfold last quarter when the stock ran up and then got a reality check. Doesn’t mean we don’t like it over the long term though.
The Valuation
Intel is currently trading at roughly 130x forward earnings a level that is more than double what it reached during the dot-com bubble.
For perspective:
- TSMC and Nvidia are closer to ~25x
- AMD sits around ~40x
That doesn’t invalidate the long-term story but it leaves the stock exposed in the short term.
The Real Story: Positioning, Not Products
Right now, the Intel story feels less about what they make and more about where they sit in the ecosystem.
TSMC has emerged as the backbone of modern compute, manufacturing chips for virtually everyone:
- Apple (iPhone chips)
- Nvidia GPUs
- Tesla AI systems
- Google TPUs
That dominance makes Intel attractive to those customers, at minimum, for diversification reasons: see below.
Why Intel Still Matters
Despite near-term concerns, Intel sits at the center of a critical shift. There’s growing demand for a second advanced manufacturing option, driven by:
- Geographic diversification (U.S. / Europe)
- Increased negotiating leverage vs. TSMC
- Supply chain resilience
We’re already seeing movement:
- Nvidia began working with Intel
- Google and Tesla have explored similar paths
At the same time, the U.S. government is heavily incentivized to support a domestic foundry leader which adds another structural tailwind to Intel’s long-term positioning.
The Challenge: Execution
Even with demand rising for core Intel products like CPUs from agentic AI the company still faces real constraints:
- Intense competition from AMD, Nvidia, and ARM-based players
- Established ecosystems with higher-margin businesses
- Ongoing struggles to meet production demand
As CEO Lip-Bu Tan recently put it:
“We are not able to fully meet demand in our markets.”
He also emphasized this is a multi-year turnaround, not a quick fix.
Bottom Line
Intel’s long-term setup is real and arguably strengthening. But in the near term, the stock looks ahead of itself and investors might get a another reality check at the end of this week.