Intel and TSMC Are Vying for Chip Fabrication Supremacy. 1 Offers Superior Value.
The two key players in chip fabrication industry are Taiwan Semiconductor Manufacturing (NYSE:TSM) and Intel (NASDAQ:INTC). But Taiwan Semiconductor has a monster lead, which can’t be denied. As clients were losing their business to other foundries, Intel was once a big player but allowed its technology to slip away and ended up losing the clients to other foundries, namely TSMC.
But, Intel’s chip foundry business is poised to get going once again with recent investments from Nvidia and the U.S. government. There’s a significant market shift on the horizon that may unfold in the coming years, but which stock is poised to make the most of it? Let’s take a look.
Intel is doing very well.
Intel has divided its operations into two segments: Intel Foundry and Intel Products. Intel products are its devices, such as CPUs, and are divided into two business segments: the Client Computing and the Physical AI Group, and Data Center and AI. It’s not what’s being faced by TSMC, but it is having pretty good growth figures with revenue growth of 28% YoY to $15.1 billion. The fact is, however, that it’s a healthy sign because investing in Intel also picks up these segments; just not the foundry business.
Intel’s foundry business has been steadily improving and is thus generating revenue of $5.8 billion, a 31% increase year over year. So, it’s a lot smaller of a business unit than its products. If Intel’s foundry business can keep on signing new clients, however, it could be the beginning of a major growth trend.
However, it’s much smaller in size than TSMC. Only compare the foundry division of Intel with TSMC, as it is only a foundry company. Its revenue for Q3 was $46.7 billion, which is a 41% increase year over year. If we go back to Q2, then TSMC has been growing by 34% year over year to $40.2 billion.Now, if we go back to Q2, then TSMC has been growing by 34% year over year to $40.2 billion.
So, if you take Q2 results into consideration, it can be said that the growth performance of both TSMC and Intel are on par, with the significant size differential being the only difference.
Read Also:Intel and TSMC Are Vying for Chip Fabrication Supremacy. 1 Offers Superior Value.
However, there is one key point that investors must not overlook – profitability. Intel is battling to make its foundry side of its business profitable right now. Its operating margin for Q2 was a pretty sad 36% loss. On the other hand, the operating profit margin of TSMC was 59%.
So that means that for Intel, the Foundry business is a serious loss leader and for TSMC, it has done an incredible job! I felt this was an interesting point to remember, because it helps to give you some context on the valuation of the two.
A quick look at Intel’s stock price reveals how much more premium it seems to be going for these days.
Investors most often use the price-earnings ratio (P/E) to determine the value of a stock. It works for some situations, but it’s a terrible idea for Intel as their foundry operation is very unprofitable this year. The profitability of Intel, however, should improve if we focus more on next year, and then, the PE ratio is more in line with levels of other companies.
Using an estimate of 2027 earnings, the price of Intel is 44 times the earnings, while TSMC’s is 18. It’s a pretty significant price difference and a testament to the fact that TSMC is offering better value than Intel. It’s not that Intel’s stock was not doing great in 2026, however. But its recovery is by no means over, despite the market’s acceptance of it as a winner.
I’m hoping for an Intel turnaround, but not buying the stock. Rather picking Taiwan Semiconductor is much more sensible, because it’s a relatively inexpensive company and has already been the place Intel is attempting to be.
Would you invest in Taiwan Semiconductor Manufacturing at this moment?
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