BofA's Vivek Arya on Intel: We see no reason to buy a stock at 90x P/E
Speakers
Vivek Arya
— Analyst, BofA Securities
Summary
Vivek Arya, Bank of America Securities senior semiconductor analyst, joins Squawk Box to discuss Intel's quarterly earnings and the stock's sharp decline despite an earnings beat. He remains bearish on Intel with an Underperform rating and $40 price objective, arguing the stock is overvalued at 90x P/E and that manufacturing execution and product pipeline lag competitors. He favors NVIDIA and AMD as better-positioned AI semiconductor competitors, highlights TSMC's leading-edge manufacturing scarcity, and views potential China H100 approvals as only an incremental positive for NVIDIA.
- Intel beat expectations but shares fell 13% as Q1 guidance was light due to supply constraints.
- Vivek Arya rates Intel Underperform with a $40 price objective and sees no reason to buy at 90x P/E.
- He says Intel's manufacturing execution and product pipeline lag the industry and the turnaround may take until 2028.
- NVIDIA and AMD are viewed as much better positioned for AI and high-end manufacturing demand.
- Taiwan Semiconductor is described as the only leading-edge manufacturer, creating scarcity value.
- Potential China approvals for H100 purchases are an incremental positive for NVIDIA but small versus its total revenue.
- NVIDIA trades at 24-25x P/E versus Intel at 90x, per Vivek.
- The discussion also touches on US-China technology engagement and Chinese software innovation.
Ideas
Intel overvalued; underperform rating, $40 target.
Vivek has an Underperform rating and a $40 price objective on Intel. He says there is no reason to buy the stock at 90x P/E when NVIDIA trades at 24-25x, especially because Intel's manufacturing execution and product pipeline are not keeping pace with the industry. Intel is trying to outcompete TSMC and NVIDIA/AMD while keeping expenses flat, which he sees as very difficult, and he expects the turnaround to take two to three more years or until 2028. He acknowledges near-term demand is outpacing supply, but says better-prepared competitors are much better positioned.
NVIDIA, AMD better positioned than Intel.
NVIDIA and AMD are much better positioned than Intel because they have better prepared for AI demand and the high-end manufacturing environment. NVIDIA is the market leader and trades at only 24-25x P/E, while Intel trades at 90x; AMD is among the better-prepared competitors. Their relative advantage is reinforced by Intel's difficulty trying to outcompete them while keeping expenses flat.
TSMC leading-edge monopoly creates scarcity value.
Taiwan Semiconductor is the only company that can supply leading-edge manufacturing, which has created significant scarcity value in high-end manufacturing. That scarcity makes TSMC the clear leader and a key beneficiary as industry demand for leading-edge capacity outstrips supply.
