Intel (INTC) shares are extending gains this morning after President Donald Trump said Apple Inc has agreed to work with the multinational to design and build its chips in America.
The semiconductor giant is now trading at a year-to-date of $134.
At current levels, it’s being valued the same as AMD or TSMC on an enterprise value-to-sales (EV/sales) basis.
But Wall Street skeptics, including Wedbush’s senior analyst Matt Bryson, aren’t really convinced that Intel stock deserves to trade at a similar valuation multiple as those two giants.
Why Intel stock doesn’t deserve the same multiple as TSMC
Bryson’s hesitance to embrace INTC’s share price rally boils down to stark operational realities – particularly when evaluating Intel alongside TSMC.
“Taiwan Semi has well over 60% gross margins,” Bryson noted, while Intel is still at around 40% currently, he told CNBC in an interview today, adding this gap highlights TSMC’s superior business model and foundry execution.
The vulnerability is especially pronounced given TSMC is now preparing to ramp into its highly anticipated 2-nanometer node, a milestone Bryson believes isn’t fully factored into Street estimates.
Intel’s aspiration to serve as both an open foundry and a leading chip designer remains unproven, and until it matches TSMC’s manufacturing excellence, valuing the two firms equally remains a premature stretch for conservative market analysts.
Why INTC shares can’t justify a similar multiple as AMD
The comparison becomes equally challenging for Intel shares when measured against AMD on the architectural front.
In the highly lucrative compute space, AMD holds a distinct design edge, boasting “a better server chip” and marching steadily toward its own 60% gross margin target.
Plus, Intel remains noticeably absent from high-growth segments where its competitor is already thriving.
Specifically, Bryson points to AMD’s MI series accelerators – a crucial architecture in the broader artificial intelligence (AI) infrastructure boom – as “a place where INTC doesn’t play.”
Without a matching component in this accelerator category, Intel is structurally disadvantaged – while Advanced Micro Devices is fully equipped to absorb the exponential demand for advanced silicon, he noted.
Wedbush warns of massive downside in Intel Corp
All in all, Intel’s recent triumphs – boosted by geopolitical favour from the Trump administration and a new world of multi-trillion-dollar addressable markets for compute – undeniably justify a recovery from its historical lows.
The high-profile Apple partnership and updates to Intel’s 18A process variants are poised to expand the firm’s top-line model and alter its revenue trajectory for the coming year.
However, Bryson cautions that this rising tide lifts all boats, as both TSMC and AMD enjoy similar secular tailwinds with better-executed business models.
Until INTC stock translates its high-flying aspirations into actual operational parity, it remains an expensive bet compared to its more robust semiconductor peers.
Wedbush currently rates it at “Hold” only, with a bearish price target of $60 only.
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