TLDR
- Citi downgraded Intel (INTC) stock to Sell from Neutral despite raising price target to $29
- Downgrade comes after Intel surged 23% on Nvidia partnership announcement Thursday
- Analyst believes Intel’s foundry business has minimal chance to compete with TSMC
- Stock has rallied 50% since early August, now pricing in foundry success that may not materialize
- Wall Street consensus remains Hold with average price target implying 22% downside risk
Intel stock faced selling pressure in premarket trading Friday after Citi analyst Christopher Danely issued a downgrade to Sell from Neutral. The move comes just one day after Intel shares surged nearly 23% on news of a major partnership with Nvidia.
Danely raised his price target to $29 from $24 per share but warned investors that the recent rally has pushed Intel’s valuation beyond reasonable levels. The 4.5-star analyst believes the stock is now pricing in a successful foundry turnaround that remains highly uncertain.
Thursday’s partnership announcement revealed that Nvidia would invest $5 billion for a 4% stake in Intel. The deal also includes Intel building CPUs that Nvidia will integrate into its AI platforms and developing processors with Nvidia graphics for the PC market.
Intel shares have rallied approximately 50% since early August. Much of this gain stems from speculation that the Nvidia deal signals broader foundry opportunities ahead. However, Citi disagrees with this optimistic outlook.
Foundry Business Faces Steep Competition
Danely expressed doubt about Intel’s ability to compete in the foundry space against established players like Taiwan Semiconductor Manufacturing. He noted that Intel’s foundry operations are “years behind TSMC” in terms of technology and market position.
The analyst sees minimal improvement potential from the Nvidia partnership itself. Better graphics capabilities won’t make Intel’s CPUs superior to AMD’s offerings, since the processor remains the primary performance driver.
Citi estimates the CPU opportunity for Nvidia’s AI platforms represents only $1-$2 billion in potential revenue. This would account for roughly 3% of Intel’s projected 2026 sales, making it a relatively small piece of the overall business.
The partnership announcement has created expectations for additional foundry deals. Danely remains skeptical that such agreements will materialize given Intel’s technological disadvantages.
Valuation Concerns Drive Downgrade
The Citi analyst’s primary concern centers on valuation rather than operational improvements. Intel’s recent rally has pushed the stock to levels that assume a complete business turnaround has already occurred.
Danely ranks 775 out of more than 10,000 analysts tracked by TipRanks. His track record shows a 63% success rate with average returns of 11.3% per rating over one year.
The analyst argues that Intel’s foundry business has only a slim chance of achieving the success that current stock prices reflect. This creates an unfavorable risk-reward ratio for investors at present levels.
Current market expectations appear to discount the significant challenges Intel faces in catching up to foundry leaders. The company must overcome years of technological gaps while competing against well-established rivals.
Wall Street Remains Cautious
Broader analyst sentiment on Intel reflects mixed views about the company’s prospects. Wall Street maintains a Hold consensus rating based on recent analyst recommendations.
The current breakdown includes one Buy rating, 26 Hold ratings, and three Sell recommendations assigned over the past three months. This distribution suggests widespread caution about Intel’s near-term outlook.
The average price target of $23.61 per share implies 22.77% downside risk from current levels. This target reflects concerns about whether Intel can justify its recent valuation gains.
Intel stock has gained 44.6% over the past year, making it one of the better-performing semiconductor names. However, much of this performance has come during recent weeks rather than steady progress throughout the year.
The Nvidia partnership represents Intel’s most high-profile foundry win in recent memory, but Citi questions whether it signals a broader competitive breakthrough for the company’s manufacturing operations.
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