Market Skewed Against Nvidia Investment, According to Intel Insights
In a series of recent developments, Intel Corporation has seen a significant boost in its stock price, with a surge of over 50% since the last report. This surge can be attributed to the latest announcement of a $5 billion investment by Nvidia Corporation, marking a strategic collaboration between the two tech giants.
However, amidst the excitement, Intel's EBITDA expectations for the upcoming years have been revised downward. For this year, the expectations have been revised downward by 1.8%, while for the year after, they have been revised downward by 6.8%, and for 2027, by 1.4%. These revisions have resulted in a decrease of 3.3% for the EBITDA estimates for the years 2025-2027, and the Compound Annual Growth Rate (CAGR) has dropped from 27.1% to 26.5% for the period 2024-2027.
The collaboration between Intel and Nvidia seems to be focused on product development, specifically in data center and personal computing solutions. Intel will build Nvidia-custom x86 CPUs for the AI infrastructure market, while for personal computing, Intel will build x86 system-on-chips for RTX GPU chiplets.
Despite the strategic partnership, Intel's foundry business cash flow problems remain unaddressed, as the cash raised does not seem to be intended for that purpose. Moreover, Nvidia continues to partner with TSMC for foundry work, indicating that Intel's foundry business may not be a significant focus of the collaboration.
Softbank invested $2 billion in Intel, buying shares at $23 per share, and the U.S. Government took a 9.9% stake in Intel at $20.47 per share, totaling $8.9 billion. The U.S. Government has the option to increase its stake by another 5% at $20 per share if Intel ceases to have a majority ownership of the foundry business.
The Aerospace Forum has developed a stock screener for multi-year price targets using analyst consensus on EBITDA, cash flows, and balance sheet data. However, the partnership between Intel and Nvidia may potentially expand the EV/EBITDA multiple, but a proper justification for that is currently absent.
Lip-Bu Tan, who became CEO of Intel Corporation in March 2025, is driving the company's transformation and new investments. He has been the manager or leader of the company mentioned in the news articles reporting on these investments.
Despite the revised EBITDA expectations, there is currently no justification for higher trading multiples due to the Intel-Nvidia agreement. At the company median EV/EBITDA, the stock is fully valued until 2027. This suggests that while the partnership may bring exciting opportunities, investors should approach the stock with caution, considering the revised EBITDA expectations and the absence of a justification for higher trading multiples.
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