Intel (INTC +4.85%) was one of the world's most valuable chipmakers. But today, it's worth $94 billion, making it far less valuable than Advanced Micro Devices, Nvidia, Qualcomm, Broadcom, Texas Instruments, and other major chipmakers.
Intel was once considered a linchpin of the semiconductor sector because it was the top producer of x86 CPUs for PCs and servers. However, it became a lot less relevant as chipmakers gravitated toward Arm's more power-efficient chip designs for mobile, automotive, and Internet of Things (IoT) chips. Intel also fell behind Taiwan Semiconductor Manufacturing, the world's largest and most advanced contract chipmaker, in the "process race" to manufacture smaller and denser chips. As a result, AMD, which outsourced its production to TSMC, pulled ahead of Intel with higher-end chips.
Image source: Getty Images.
Intel has been scrambling to upgrade its own foundries to regain the process lead from TSMC, but it's been a costly and futile effort. Several recent reports suggest that Intel could even spin off its capital-intensive foundry unit to mitigate its losses.
For now, analysts expect Intel's revenue to grow at a compound annual growth rate (CAGR) of 4% from 2023 to 2026 as it rolls out its newest chips and the PC market stabilizes. But assuming it hits those targets and still trades at 2.5 times sales, Intel's market cap would only rise to about $154 billion by 2026 -- making it less valuable than AMD, Nvidia, Qualcomm, Broadcom, and Texas Instruments today.
I believe two other smaller chipmakers could join that growing list and eclipse Intel's market cap in two years: Marvell Technology (MRVL +0.30%) and Micron Technology (MU 0.49%).
1. Marvell Technology
Marvell manufactures a wide range of data processing, infrastructure, Wi-Fi, and custom chips for the cloud, 5G, automotive, enterprise networking, and AI markets. It currently has a market cap of $66 billion, and analysts expect its revenue to grow at a CAGR of 18% from fiscal 2024 to fiscal 2027 (which ends in February 2027).
NASDAQ: MRVL
Key Data Points
Marvell's stock trades at 12 times this year's sales, which might seem like a high valuation for a diversified chipmaker. However, that's because most of its recent growth was driven by the market's soaring demand for its optical and networking chips, which are used to upgrade data centers so they can handle the torrent of data from the latest AI applications.
Marvell already generated 10% of its revenue from AI-oriented chips in fiscal 2024, and it expects that percentage to increase in fiscal 2025. That expansion should complement the recovery of its carrier, enterprise networking, consumer, auto, and industrial markets in a warmer macroeconomic environment.
If Marvell matches Wall Street's expectations and still trades at 12 times sales by fiscal 2027, its market cap could grow to $108 billion, making it more valuable than today's Intel. If it trades at 20 times sales, its market cap could hit $180 billion.
2. Micron Technology
Micron is one of the world's largest producers of DRAM and NAND memory chips. Its market cap surpassed Intel's earlier this year, and it's currently worth about $107 billion. I believe Micron can easily maintain that lead over the next two years.
NASDAQ: MU
Key Data Points
Micron's business is highly cyclical. In fiscal 2023 (which ended in August 2023), its revenue plunged 49%, and it turned unprofitable. That deceleration was caused by declining PC shipments and the end of the 5G smartphone upgrade cycle.
But from fiscal 2023 to fiscal 2026, analysts expect Micron's revenue to increase at a CAGR of 42% as a new cyclical growth cycle begins. It's also expected to turn profitable again in 2024 and grow its earnings per share (EPS) at a CAGR of 306% over the following two years. Those are stunning growth rates for a stock that trades at just 4 times this year's sales.
If Micron meets Wall Street's expectations and still trades at the same price-to-sales ratio by fiscal 2026, its market cap could grow to more than $190 billion by the final year. That rapid expansion should be driven by the stabilization of the PC and smartphone markets, the growth of the auto and industrial markets, and rising sales of solid-state drives (SSDs) and high-bandwidth memory (HBM) to process more AI tasks at data centers.
Are Marvell and Micron better buys than Intel?
Intel isn't down for the count yet, but it clearly faces existential challenges. So instead of betting on Intel's long-shot recovery, I think it's smarter to invest in Marvell's secular expansion or the beginning of Micron's latest multiyear-growth cycle.
