Intel: Don’t Bet On It Catching Up To TSMC

Summary:

  • I believe the longer term bull case on Intel’s outperformance requires Intel to close its technological gap with TSMC.
  • But TSMC’s CEO has very unambiguously stated an informed opinion that they will remain a step ahead of Intel and I find this narrative more credible.
  • Intel is facing inventory-correction and demand related headwinds in at least 36% of its business heading into FY24.
  • Given the lackluster outlook, the stock seems expensive with little margin of safety for value buys.
  • Technical analysis also suggests negative alpha ahead for Intel vs the S&P500.

Reaching the line

FotografiaBasica/iStock via Getty Images

Thesis

I am bearish on Intel (NASDAQ:INTC) due to 3 key reasons:

  1. Despite efforts to catch up, Intel may remain well behind TSMC in foundry technology
  2. There are many business headwinds heading into FY24
  3. Valuations


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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