Intel (NASDAQ:INTC) struggled to maintain its moat across its central processing unit (CPU) and artificial intelligence businesses. The chipmaker also grappled with market share losses to Advanced Micro Devices (NASDAQ:AMD) and Arm Holdings (NASDAQ:ARM) in both the PC and server markets, as well as limited integration with AI accelerators, despite a partnership with Nvidia (NASDAQ:NVDA).
Bank of America Securities analyst Vivek Arya downgraded Intel to Underperform from Neutral with a $34 price forecast.
Also Read: Intel Unveils New Processors To Power AI, Gaming Devices
Arya kept his estimates and a price forecast intact, citing a strong balance sheet but continued challenges in its competitive positioning and AI strategy.
However, the analyst noted that Intel's recent $80 billion increase in market cap largely reflects its improved finances and potential in external foundry services, rather than meaningful progress in its product pipeline.
He emphasized that Intel lacks a competitive AI portfolio, struggles in server CPU performance, and now has less flexibility to divest unprofitable manufacturing operations.
Arya highlighted that Intel's current $37 share price implies approximately $1.68 in calendar year 2027 EPS—42% above consensus—assuming it trades at the exact 22 times calendar 2027 P/E multiple as the SOX index. Achieving this EPS would require roughly $10 billion in incremental calendar 2027 revenue from either its CPU portfolio or external customer wins, the analyst noted. He also factored in approximately 14% dilution from planned equity exits and contributions from noncontrolling interests, such as those from Apollo and Brookfield.
Arya criticized valuation methodologies that apply a sum-of-parts approach, noting that Intel Foundry cannot sustain itself independently and relies heavily on internal Intel Products customers. Even if the foundry secures $5–10 billion in external revenue, it would remain unprofitable through calendar 2027, he said. Intel also relies on Taiwan Semiconductor (NYSE:TSM) for approximately 30% of its manufacturing, with ongoing uncertainties surrounding its 18A and future 14A process nodes, Arya noted.
Arya argued that valuations should focus on PE or EBITDA across the entire company rather than isolating the foundry.
Despite challenges, Intel retains several upside catalysts. It may receive up to $20 billion in capital from the U.S. government, Nvidia, SoftBank (OTC:SFTBY), and the sale of Altera assets, the analyst noted. Its partnership with Nvidia strengthens its enterprise AI positioning, although the lack of an AI accelerator product limits broader upside, he said. Intel could also benefit from wins in packaging or application-specific integrated circuits (ASICs), but material wafer-processing gains are unlikely in the near term, Arya added.
Intel continues to lose CPU market share to AMD and Arm in both the PC and server segments, the analyst said. In PCs, Lunar Lake and Arrow Lake CPUs utilize Taiwan Semiconductor's N3 nodes, enhancing competitiveness in laptops; however, high-end desktops still face average selling price pressure and share loss, he noted.
Arya told Panther Lake (18A) laptops, shipping by late 2025, mark progress for both Intel Products and Intel Foundry, though desktop upgrades remain critical.
In servers, Intel's 3-node CPUs lag AMD's Zen 5 Turin processors, and integration with AI accelerators remains limited despite the Nvidia partnership, Arya concluded.
Price Action: INTC stock is up 1.97% at $37.08 as of last check on Monday.
Read Next:
Photo: Shutterstock
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
