Intel Corporation

(NASDAQ Global Select)
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Somewhat Bullish +45

Intel and Applied Materials Just Deepened Their AI Partnership. Which Stock Looks Better Positioned?

AI partnership Advanced packaging Company update AI-generated analysis

🀝 Intel and Applied Materials expanded their partnership on October 6 to collaborate on next-generation AI chipmaking, transistors, wiring, and advanced packaging including Foveros technology.

πŸš€ The collaboration aims to move new technologies from the lab into high-volume U.S. production faster, with joint teams based in Silicon Valley and Oregon.

πŸ“¦ Analysts identify Intel's packaging business as a key turnaround catalyst, noting it can reach 40% gross margins and potentially secure billions in annual revenue quickly.

πŸ’° The partnership is expected to help Intel bring new packaging technology into production sooner, adding a dimension to its growth story.

πŸ“‰ Intel's valuation is considered cautious by the analyst, with a forward non-GAAP P/E of 73.94x sitting about 20% above its five-year average.

πŸ’Έ Intel carries approximately $21 billion in net debt, which contrasts with Applied Materials' net cash positive position.

πŸ“ˆ Analysts expect Intel's earnings to grow 37% in 2027 and 48% in 2028, though justifying the current premium valuation remains a challenge.

πŸ”§ Applied Materials expects its packaging revenue to grow more than 70% in calendar 2026 as it benefits from the industry-wide shift toward advanced packaging.

Bullish Signals
  • Intel and Applied Materials deepened their AI partnership on October 6, focusing on Foveros technology for stacking chips in 3D to accelerate time-to-market.
  • Packaging is identified as the most promising part of Intel's turnaround, with potential gross margins reaching 40% and deals worth billions annually.
  • The collaboration with Applied Materials should help Intel bring new packaging technology into high-volume U.S. production faster than typical foundry wins.
  • Industry reports link Intel to potential advanced packaging deals with major cloud customers, which this partnership aims to facilitate.
Risk Factors
  • Intel's forward non-GAAP P/E of 73.94x sits about 20% above its five-year average, indicating an elevated valuation relative to historical norms.
  • The company's forward Price-to-sales ratio of 9.37x is nearly three times its average of 3.17x, suggesting a steep premium.
  • Intel carries approximately $21 billion in net debt, which adds financial leverage compared to competitors like Applied Materials.
Full Analysis
Intel Corporation (INTC) and Applied Materials Inc. (AMAT) announced an expanded partnership on October 6 to accelerate the development of next-generation AI chipmaking technologies. The collaboration focuses on advanced transistors, interconnect wiring, and Intel's Foveros 3D stacking technology, with joint teams operating out of Silicon Valley and Oregon. CEO Lip-Bu Tan stated the primary objective is to expedite the transition of new technologies from laboratory research to high-volume U.S. production. Analyst Jabran Kundi views this partnership as a significant catalyst for Intel's turnaround strategy, specifically highlighting packaging as the most promising near-term growth area. While Intel's foundry process wins typically take years to secure, packaging deals can materialize much faster with potential gross margins reaching 40%. The collaboration is expected to help Intel integrate advanced packaging technology into production sooner, potentially securing billions in annual revenue from major cloud customers. Despite the strategic benefits, the article notes that Intel's valuation appears elevated relative to its historical averages, trading at a forward non-GAAP P/E of 73.94x and a price-to-sales ratio nearly three times its five-year average. The company also carries approximately $21 billion in net debt. In contrast, Applied Materials is described as having a simpler growth story driven by its equipment supply role across the industry and is currently net cash positive, though it also trades at a premium valuation.