Over the past 12 months, the share price of technology company Intel has skyrocketed roughly 400%. Why is Intel delivering such extraordinary returns, and is the stock’s performance sustainable?
The top line is that Intel is experiencing a turnaround because of new management, significantly improved operating performance, and an injection of capital from the administration of President Donald Trump. In addition, Intel is making progress in improving its semiconductor foundry business. Under CEO Lip-Bu Tan, who took control of Intel last year, the company is delivering better-than-expected earnings and revenue. A major reason for the improvement in results is a resurgence in demand for the company’s core business: designing and manufacturing central processing units. A CPU is the brain of a computer. It executes the instructions that keep the machine operating.
CPUs are essential for agentic artificial intelligence, which runs AI models in real time for users. Demand for agentic AI is exploding. Consequently, the long-term outlook for Intel’s core CPU business appears positive.
Regardless, a closer look at Intel’s story makes the current share price suspect. The most optimistic estimates for the company’s 2026 earnings are around $1.20 per share. So even if Intel delivers earnings at the high end of analyst expectations, the stock, at its current price of roughly $120 per share, is trading at approximately 100 times projected earnings. Unless the long-term outlook is truly extraordinary, the stock is clearly overvalued.
Yes, CPU demand is surging because of agentic AI, but Intel is competing against superior companies in this market: Advanced Micro Devices and Arm Holdings. These two companies will probably dominate the market for agentic AI CPUs. Intel is unlikely to experience phenomenal growth in this segment.
The other critical operating segment for Intel is its semiconductor foundry business. Optimists believe the company’s manufacturing division will successfully transition to high-volume production using its latest generation semiconductor fabrication processes. Next year, the company hopes to win manufacturing contracts from Microsoft and Amazon Web Services. If that happens, Intel could become cash flow positive in its foundry business.
Analysts say Intel’s latest fabrication technology is technically viable and is successfully producing chips. But can the company translate engineering success into a profitable foundry business capable of taking market share from the world leader in semiconductor manufacturing, Taiwan Semiconductor Manufacturing Company?
Intel faces a classic chicken-and-egg dilemma. The company must win fabrication business from world-class chip designers such as Microsoft and Amazon, but those companies are hesitant to shift production away from TSMC until Intel proves it can match TSMC’s operational capabilities.
TSMC remains the dominant company in advanced semiconductor manufacturing. The company has scale, high margins, deep customer relationships, and unmatched execution. TSMC fabricates the most advanced chips for Nvidia, AMD, and the hyperscalers. Importantly, TSMC’s newest and most advanced fabrication technology, the 2-nanometer node, is effectively sold out. To maintain its leadership position, TSMC plans to invest more than $50 billion in 2026 into its fabrication operations. By contrast, Intel’s capital spending for its foundry business will be around $9 billion.
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Consequently, the evidence strongly suggests that Intel will not be able to match TSMC anytime soon. High-end 2027 earnings estimates of $1.75 per share seem fanciful. Moreover, even if Intel wins business from Microsoft and Amazon and delivers on optimistic projections for its CPU business, the stock would still be trading at roughly 70 times projected 2027 earnings.
That valuation seems excessively optimistic, especially when the global leader in chip design, Nvidia, trades at less than 20 times forward earnings estimates. So the weight of the evidence suggests that Intel, at the moment, is more of a meme stock than a truly investable company.
James Rogan is a former foreign service officer who later worked in law and finance for over 30 years. Now he writes a daily note on markets, economics, politics, and social issues.