Key Points
Excitement around Intel's foundry business has been building over the past year.
The company's foundry segment grew by 4% last quarter.
Intel's stock is expensive, however, currently trading at around 85 times its expected future earnings.
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Intel (NASDAQ: INTC) has been a scorching-hot stock over the past 12 months, as it has more than doubled in value during that stretch. In January, the stock hit a 52-week high of $54.60, but it's now down about 18% from that level.
Growth investors have become increasingly bullish on Intel as a result of its foundry business and the hope for tremendous opportunities ahead due to artificial intelligence (AI). But with so much optimism effectively priced into the tech stock these days, did it already reach a peak in January, or can this still be a good buy right now?
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There are still many question marks surrounding the business
While Intel's stock enjoyed a great year on the markets last year, that doesn't mean the business has proven that it's a safe investment, or that its future growth is assured. The hope is that it will be a top AI chipmaker in the U.S., but simply securing investments from the U.S. government and even Nvidia are by no means proof of that.
What matters are the cold-hard numbers, and the ability for Intel to be able to compete against Taiwan Semiconductor Manufacturing. And when Intel reported its most recent numbers back in January, they didn't look all that great. The company's overall revenue was down 4%, although the positive was that its foundry operations generated 4% positive growth. The bigger issue, however, is profitability. The company's foundry segment incurred an operating loss of $2.5 billion, which was larger than the $2.2 billion loss it posted a year ago.
Intel's stock looks expensive
Due to Intel's significant run-up in value last year, plus its 20% rally thus far in 2026, the stock is incredibly expensive right now. Even based on forward earnings, which are based on analyst projections, the stock trades at a multiple of 85. That's astounding, given not only the risk with Intel's stock and that the average stock on the S&P 500 only trades at 22 times its estimated future profits. At this type of valuation, investors are paying a massive premium.
There's simply too much optimism priced into Intel's valuation right now to make it a good buy. While it's still rallying this year, I do think it may have already reached a peak. It has been a highly volatile investment over the past 12 months, and while it has looked great, I wouldn't be surprised to see the stock give back some more gains in the weeks and months ahead.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
