1 Analyst Says This Chip Stock Could Soar 625% to Join Nvidia in the $5 Trillion Club

Throughout the artificial intelligence (AI) revolution, a number of companies have seen their valuations reach trillion-dollar status. In particular, several semiconductor stocks have gained the keys to the trillion-dollar club -- joining longtime members Apple, Microsoft, Alphabet, and Amazon.

Only one company has ever reached a $5 trillion market capitalization: Nvidia, whose meteoric growth has been fueled by the company's dominance in AI training accelerators. Wall Street analyst Trip Chowdhry of Global Equities Research thinks this is going to change. In a recent note, Chowdhry boldly suggests that Intel (NASDAQ: INTC) will join Nvidia and become a $5 trillion company.

Given Intel's market value of roughly $690 billion, Chowdhry's forecast assumes 625% upside in the stock. Intel's broad CPU portfolio and emerging foundry ambitions give the company a plausible path toward joining the trillion-dollar tier. The larger question, however, is whether these strengths are enough to support a valuation 5 times higher.

Image source: The Motley Fool.

Intel is in the early stages of a turnaround

Right off the bat, it's important to note that Intel is in the midst of restoring its technological and manufacturing leadership in the chip industry. Meaningful investments have gone into reviving the company's foundry business as well as advancing its process technology roadmap -- particularly with its 18A node and related architectures.

Early customer wins for next-generation server processors and client CPUs demonstrate that Intel is regaining design wins in core segments. While these developments are encouraging and signal that Intel can compete with larger chip manufacturers, the company's turnaround is far from complete. Smart investors understand that Intel's ongoing capital expenditures (capex) will weigh on consistent, high-margin profitability across the business for the time being.

The AI chip space is crowded

The AI semiconductor industry is defined by intense rivalries across multiple fronts. While Nvidia continues to set the pace in GPUs, Advanced Micro Devices has established itself as a formidable alternative. Meanwhile, specialized application-specific integrated circuits (ASICs) from Broadcom and Marvell Technology are increasingly capturing important niches in networking, storage, and custom inference.

Intel's most obvious opportunity lies in leveraging its CPU strengths and process advances to serve the expanding inference and edge AI needs of hyperscalers. However, neither of these pockets of the AI ecosystem is guaranteed to favor any single chip architecture. This puts Intel in a tough spot, because the company must not only match but exceed its competition in cost, power, and software support to gain durable market share.

Can Intel become a $5 trillion company?

Chowdhry is forecasting Intel's earnings per share (EPS) to reach $10 by 2030. This implies roughly a tenfold increase in earnings over the next five years. Should Intel achieve this aggressive target and maintain its current forward price-to-earnings (P/E) multiple of 113, the company would reach a market cap of roughly $1.3 trillion.

INTC EPS Estimates for Current Fiscal Year data by YCharts

In my eyes, this outcome is attainable if Intel continues to execute on its process road map, secures additional foundry customers, and capitalizes on accelerating CPU demand. Nevertheless, maintaining a forward earnings multiple at that level will be no easy feat.

This makes the prospects of reaching a $5 trillion valuation a bit overzealous. Assuming Intel reaches and sustains Nvidia-like dominance across a vast and still-evolving portion of the AI chip economy seems unrealistic. That level of influence would require Intel to capture a disproportionate share of new AI workloads while simultaneously fending off well-capitalized competitors across both general-purpose and specialized silicon.

Given the breadth of the competitive landscape, the capital intensity required to build leading-edge manufacturing, and the uncertainty around how AI workloads will be distributed, such an outcome looks improbable -- even by next decade. While Intel stock still has upside, investors need to be realistic about the magnitude of gains they can expect from a company that faces numerous execution and competitive headwinds.

Adam Spatacco has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Broadcom, Intel, Marvell Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.