TSMC a Long-Term Buy, Intel a Near-Term Hold

Intel is a near-term hold, while Taiwan Semiconductor is a long-term buy. Intel enjoys support from the US government and Nvidia, while Taiwan Semiconductor is a leading chipmaker with a strong track record. The author previously downgraded the rating for Taiwan Semiconductor in July, but now sees it as a long-term buy due to its leading position in the chip industry.

The semiconductor industry is undergoing significant shifts, with key players like Intel Corporation (NASDAQ:INTC) and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) at the forefront. Recent developments, including government support and strategic partnerships, have altered the near-term prospects for these companies. This article aims to provide a comprehensive analysis of their long-term fundamentals, concluding that while Intel remains a near-term hold, Taiwan Semiconductor is a long-term buy.

Intel's Near-Term Hold Status

Intel has seen substantial support from the U.S. government and a strategic partnership with Nvidia (NVDA). The Trump Administration's 10% stake in Intel, valued at $11.1 billion, and Nvidia's $5 billion investment have significantly impacted Intel's stock price Intel Is A Near-Term Hold, Taiwan Semiconductor Is A Long-Term Buy^[1]. However, the near-term hold rating reflects Intel's current financial position and the need for a more stable outlook.

Intel's aggressive R&D spending, averaging around 29% of revenue in recent quarters, indicates a strong commitment to innovation Intel Is A Near-Term Hold, Taiwan Semiconductor Is A Long-Term Buy^[1]. However, the company's R&D yield, which measures the output of R&D expenses, has been under pressure and below its historical average. This lower yield suggests that Intel's R&D investments may not be translating into significant revenue growth or profitability Intel Is A Near-Term Hold, Taiwan Semiconductor Is A Long-Term Buy^[1].

Intel's ROCE (return on capital employed) has also been less stable compared to Taiwan Semiconductor. While Taiwan Semiconductor maintains a consistent ROCE of around 49%, Intel's average ROCE has been around 36% and has shown volatility Intel Is A Near-Term Hold, Taiwan Semiconductor Is A Long-Term Buy^[1]. This indicates that Intel's capital efficiency is lower than Taiwan Semiconductor's.

Taiwan Semiconductor's Long-Term Buy Status

Taiwan Semiconductor Manufacturing Company (TSMC) has extended its lead in the foundry market, controlling 38% of the market in Q2 2025, up from 31% a year ago TSMC Extends Lead With 38% Foundry Market Share^[2]. This growth is driven by strong demand for AI chips and advanced packaging, as well as Chinese subsidies. TSMC's market share is expected to continue growing due to its technological lead and strong customer ties TSMC Extends Lead With 38% Foundry Market Share^[2].

TSMC's R&D yield has consistently outperformed Intel's, with an average of around $7.99 per dollar of R&D expense, compared to Intel's average of $2.05 Intel Is A Near-Term Hold, Taiwan Semiconductor Is A Long-Term Buy^[1]. This indicates that TSMC's R&D investments are more effective in generating organic cash flow.

TSMC's ROCE has been more stable and higher than Intel's, with an average of around 49% compared to Intel's average of 36% Intel Is A Near-Term Hold, Taiwan Semiconductor Is A Long-Term Buy^[1]. This stability suggests that TSMC is more efficient in utilizing its capital.

Conclusion

While Intel enjoys government support and strategic partnerships, its near-term hold status reflects its current financial position and the need for a more stable outlook. Taiwan Semiconductor's leading position in the foundry market, strong R&D yield, and stable ROCE make it a more attractive long-term investment. Therefore, based on the provided source materials and analysis, Taiwan Semiconductor is a long-term buy, while Intel remains a near-term hold.