In this video I will be talking about why I believe Intel (INTC +4.96%) is making its way back to the top of the semiconductor world. Despite its recent struggles and market share loss to AMD and Nvidia, Intel remains the world's number one semiconductor company in terms of revenue. As I mentioned two months ago, I believe Intel is cheap compared to its peers. You can find the video below.
Valuation matters
Intel's current P/E stands at 11.5, which means it currently trades at a discount compared to the industry's average of 20 and to closest competitor AMD, which has a multiple of 37. Now, it makes sense for AMD to trade at a premium because it is going through a growth cycle while Intel has been stagnant for years.
But more recently, Intel has announced it will be investing $20 billion in its Arizona facility and $3.5 billion in its New Mexico one. This will allow Intel to build chips for other customers, just like TSMC. As of today, Intel has announced that it has recruited Amazon's AWS and Qualcomm to its "Intel Foundry Services." It might only be a matter of time before many other large corporations start using Intel's U.S.- and Europe-based fabs to build their products outside of Asia.
Intel also announced new GPUs that should compete with AMD's and Nvidia's, but they won't be available until early 2022.
Now what
According to Chinese media company UDN, Intel has purchased TSMC's remaining 3-nanometer-chip manufacturing capacity. Intel, being a much bigger player than AMD, might get earlier access to TSMC's latest manufacturing innovations.
Intel also recently announced that it has come to an agreement with the U.S. Department of Defense to establish a domestic commercial foundry infrastructure. With more than 80% of the leading manufacturing capacity being concentrated in Asia, it makes sense for the U.S. government to back a company like Intel to bring the supply chain back to the United States.
For full insights, do watch the video below.
*Stock prices used were the closing prices of August 23, 2021. The video was published on August 24, 2021.
