Intel Is Progressing a Little Bit More on Its Road to Recovery; $40 Fair Value Estimate

We expect Intel should remain the market share leader in central processing units, or CPUs, in PCs and servers for years to come. However, Intel’s best days are likely behind it, as it is at a chip manufacturing disadvantage against Taiwan Semiconductor, or TSMC, and its processor partners, such as AMD, Nvidia, and Apple. We think Intel’s aspirations to regain parity with TSMC is the right path forward but faces significant execution risk. Even if successful, Intel’s competitors will be stronger than when the firm was dominant a decade ago. In turn, we assign Intel a no-moat rating, a disappointing erosion from previous narrow- and wide-moat ratings.