HSBC thinks Intel's rally has gone too far. It expects the stock to fall by a third

HSBC analyst advised to sell Intel shares and expects them to fall by 35%. According to the expert, the rapid rally of Intel, whose shares have risen almost 88% since the beginning of the year on the back of investments by SoftBank, Nvidia and the US government, looks "excessive" and unsustainable. HSBC believes that the company is still facing structural problems in its chip business, while its long-term prospects depend on the efficiency of its own factories.

HSBC analyst Frank Lee downgraded Intel's stock from Hold to Reduce (equivalent to "sell"), but raised his target price slightly, from $21.25 to $24, MarketWatch reports. Still, Lee's new target suggests the company's stock price will fall another 35% from the previous close. According to HSBC, Intel's stock rally amid a series of large investments looks "excessive." For example, since SoftBank announced in August its intention to acquire a $2 billion stake in the company, Intel shares have risen 55%. In the long term, such growth looks "unsustainable," Lee said.

HSBC believes Intel still faces structural challenges that could limit the upside for its shares. "Intel's own efficiency in managing its manufacturing capacity remains key to a sustained recovery," Lee said, referring to Intel's chip plants. Beyond that, he added, the contract chip business remains the company's weak link - its financial performance in that area has been hampered by regular project failures. Additional uncertainty, according to HSBC's assessment, is created by the situation with the new generation of 14A processors: Intel has already admitted that it may curtail their development if it fails to find an external customer.

The only deal that, according to HSBC, would be a way to "fundamentally change" Intel's position is a technology sharing agreement with manufacturing rival TSMC. Such a collaboration, according to the analyst, could "restart" Intel's contract chip business. However, the probability of this scenario is low: TSMC already invests more than $100 billion in the development of its own production facilities in the U.S. and is hardly interested in such an alliance, says Lee.

At trading on October 8, Intel shares rose in the moment by 1.6% to $37.8. Since the beginning of 2025, the company's securities have grown by almost 88%, becoming one of the growth leaders in the S&P 500 index, MarketWatch notes. For comparison: the main U.S. stock index S&P 500 for the same period added about 15%.

Previously, investors were cautious about Intel stock because of its technology lag and poor performance in rebuilding its contract chip business, MarketWatch notes. However, after deals with SoftBank, the U.S. government and Nvidia, which are now investors in the company, Wall Street has revised its attitude to Intel's securities.

Wall Street analysts seem to agree that Intel stock's rally has gone too far. Their consensus on Intel stock is to hold previously bought shares in the portfolio (34 Hold tips out of 45), according to MarketWatch. There are only three buy tips and eight "sell" tips. The average target price of $26.7 implies a 28% drop from the last closing price.

This article was AI-translated and verified by a human editor