Intel (NASDAQ:INTC) investors have had plenty to moan about over the past few years, as the company has struggled to keep up with fellow chip peers. However, a recent string of high-profile deals has started to reshape that narrative. SoftBank’s $2 billion investment, an $11.1 billion U.S. government equity stake, and, of course, Nvidia’s $5 billion purchase of roughly 4% in Intel have all injected a renewed sense of optimism into the long-lagging chipmaker.
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That renewed optimism has been reflected in the stock, which has surged 60% since the first deal was announced in August. HSBC analyst Frank Lee thinks it’s likely more deals could be forthcoming, ones that will result in a “short-term re-rating.”
With several reports emerging about Intel pursuing potential investments from Apple and TSMC, Lee says he would not be surprised if additional similar deals are announced with other major semi players, possibly including a passive investment from TSMC itself. “However,” the analyst goes on to add, “we believe the only deal that matters that can fundamentally change anything would be one involving technology sharing with TSMC.”
That foundry segment remains Intel’s Achilles’ heel, weighed down by repeated execution missteps and uncertainty surrounding its 14A node. The recent cancellation of 18A offerings for external clients has only added to those concerns. Lee argues that a collaboration with TSMC could be the lifeline Intel needs to restore credibility and competitiveness in chip manufacturing.
However, that possibility appears remote. TSMC already has its hands full with over $100 billion committed to U.S. expansion projects, including multiple new fabs under development, leaving little incentive to share its crown-jewel technology with a rival.
Meanwhile, even the much-hyped Nvidia deal offers limited near-term upside. Under the agreement, Nvidia will source x86 CPUs from Intel for use in its NVLink rack-scale systems, but the company has made clear that its long-term roadmap still centers on Arm-based CPUs. “Hence,” Lee says, “we believe there is not enough clarity and visibility to quantify this opportunity.”
Bottom line, given the lack of visibility on that issue on top of a foundry narrative that “remains weak,” Lee thinks this re-rating is “overdone.” Accordingly, the analyst downgraded his INTC rating from Hold (i.e., Neutral) to Reduce (i.e., Sell) and although his price target goes from $21.25 to $24, the new figure still points toward 12-month share losses of 36%. (To watch Lee’s track record, click here)
Street-wide sentiment isn’t much brighter. With a Hold consensus based on 26 Holds, 5 Sells, and just 2 Buys, the $26.48 average price target suggests a potential 30% drop from current levels. (See INTC stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.