Intel (INTC -1.25%) has been on a deal-making spree over the last few months.

In mid-August, the chipmaker secured a $2 billion investment from SoftBank, just ahead of an $8.9 billion investment from the U.S. government. In September, Intel added Nvidia (NVDA -0.77%) to its growing list of stakeholders. The GPU maker is investing $5 billion in the company and partnering on new CPU designs for data centers and PCs.

With the influx of capital, backing from some of the biggest tech investors in the world, and the financial interest of the U.S. government, Intel has seen its stock price soar. However, the stock’s valuation is now far less attractive than the prices those big investors paid for it. And despite Intel’s relationship with SoftBank, Nvidia, and the U.S. government, this rival semiconductor stock still looks like a better investment.

Image source: Getty Images.

The missing piece from Intel’s deals

The big investments have created significant optimism about the future of Intel. Indeed, with Nvidia as a partner in chip design, it could help Intel win a bigger share of data center CPUs going forward.

But while Nvidia agreed to partner with Intel on new designs, it’s notably won’t use Intel for manufacturing its chips. That task remains with Taiwan Semiconductor Manufacturing (TSM 1.50%), known as TSMC.

During a press interview announcing the Nvidia-Intel deal, Nvidia CEO Jensen Huang praised TSMC, saying, “I just can’t overstate the magic that is TSMC.” He noted there are no plans for Nvidia to stop working with the Taiwanese company anytime soon.

That’s notable because Intel is still considering winding down its foundry operations if it can’t secure a major customer contract for its 14A node process. Nvidia supposedly evaluated the process and decided to stick with TSMC. If Intel shuts down its foundry business, that would be a huge win for TSMC, as it will further secure its position as a leading-edge semiconductor manufacturer.

There’s speculation that the U.S. government’s involvement with Intel could nudge some chipmakers to favor the U.S. company’s foundry services over those of foreign manufacturers. TSMC is working to combat that by building out production facilities in the U.S. And while Intel now has a lot of cash to pour into the foundry business, it’ll be hard-pressed to catch up to TSMC’s technology and capacity.

Intel raised about $16 billion from its stock sales over the last two months. For reference, TSMC is investing over $7 billion per year in research and development. On top of that, it’s building a massive new R&D center in the United States. The company’s total capital expenditures will come in close to $40 billion in 2025, ensuring it has the capacity and tooling it needs to fill the growing demand for leading-edge chips. It’s doing all this while generating tens of billions in free cash flow.

In other words, TSMC has a huge advantage over Intel, and it has the ability to spend enough to stay well ahead of it.

The stock is attractive, especially compared to Intel

While TSMC has seen its stock price soar amid the booming demand for its chip manufacturing services, its valuation is still attractive. Shares of the company trade for about 28 times expected earnings. Considering TSMC’s management expects sales to climb at a 20% compound annual growth rate between 2025 and 2029 while maintaining a strong margin profile, that’s a great price to pay for the stock.

Meanwhile, Intel is seeing its profits dragged down by its foundry business, which produced a $3.2 billion loss in operating income last quarter. And this isn’t the only recent quarter it’s been losing money. But with CEO Lip-Bu Tan focused on cutting costs, combined with recent developments, analysts expect earnings to improve, rising to $1.20 per share by 2027.

However, that puts the stock’s current price at 28 times its 2027 earnings. That compares to a 21 times multiple for TSMC’s 2027 earnings expectations.

While those estimates may change if Intel secures a big customer for its foundry business and its 14A process, the odds of that happening seem slim, even as Intel seeks investments from more big tech companies.