Intel Loses More Ground to TSMC

Three back-to-back capital increases have worked extremely well for Intel, whose share price has tripled on the stockmarket this year, despite the number of shares outstanding rising by nearly 6%.

It must be said that the lineup of new shareholders is reassuring. The US government has taken a 10% stake, making it the group's largest owner. Priced at around $20.5 per share, the deal valued Intel at $90bn.

In quick succession, SoftBank followed with an investment - modest by the standards of the generally outsized ambitions of its flamboyant chairman Masayoshi Son - of $2bn. Priced at $23 per share, Intel's market capitalization here ticked up a notch, to $100bn.

Then, another month later, came Nvidia, with a $5bn investment at an average price of $23.5. Strategic in every respect for the chip designer, whose dependence on Taiwan's TSMC remains critical, the transaction gives it 4% of Intel's equity at a valuation of around $125bn.

A neat communications win for the no less flamboyant US president, then, who can boast of having kick-started $25bn in value creation in the space of a few weeks, and nearly $160bn over a few months, since with a market capitalization of $260bn, that is the level at which Intel is now valued.

Wholesome as these deals among magnates may be, they have so far been accompanied only by a timid improvement in the fundamentals: revenue is flat and operating profit remains in negative territory, even if the loss has narrowed dramatically compared with the genuine annus horribilis that came before.

Above all, Intel has had to sharply scale back its investment plans, with $15bn invested in its industrial capacity in 2025. Across the aisle, TSMC, which remains on a roll and has just posted another record year, put $42bn into investment this year and plans to commit between $52bn and $56bn next year.

In other words, one is flying low while the other is cruising in the stratosphere. The yawning gap in efficiency is also reflected in R&D budgets: losing momentum everywhere and for a long time, Intel in fact carries R&D budgets two to three times higher than those of TSMC. See on this subject Intel falling behind TSMC financially and TSMC consolidates monopolistic position after another record year.