Intel (INTC) rebounded 90% in the past year but trades at 112 times earnings.

Intel’s EBITDA is projected to expand from $1.2B in 2024 to $25.1B in 2028.

Government funding and a Nvidia stake provide financial backing for the infrastructure buildout.

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Intel (NASDAQ:INTC) has earned the right to be taken seriously again after a multi-year dry spell that caused the previous CEO to start "fasting and prayer sessions" for the company. Just about a year later, the company made remarkable gains, and INTC stock has rallied with the optimism.

It's not all sunshine and rainbows, though. Revenue growth remains anemic, and the profits will take time to show up. Government investments, plus Nvidia (NASDAQ:NVDA) taking a stake, have made a long-term financial turnaround likely, but whether or not that is already priced in is what many investors are struggling to figure out.

INTC stock was already expensive, even after it took a 70% dive from 2021 highs. No one wants to pay up for a chip company that reports persistent losses in an environment where almost every other semiconductor stock was surging.

But the 90% rebound in the past year now causes it to trade at 112 times earnings, even if you factor out the non-recurring items. Wall Street is comfortable paying this premium because, unlike before, Intel finally has the cash to build out the infrastructure. Analysts expect a quick ramp-up in earnings, with full-year 2026 EPS at $0.48, up 15%. In 2027, EPS is expected to double to nearly $1, and some analysts estimate it as high as $1.8.

You could be paying less than 20 times 2028 earnings if all goes well.

Thus, the rally you are looking at today is following Intel's execution. Customers are ready to buy, but the capacity needs to be built out quickly, hopefully before the AI buildout starts waning.

EBITDA could go from just $1.2 billion in 2024, all the way to $25.1 billion in 2028. If the AI rally continues, EBITDA could be much higher. But if Intel can trade at 40 times EBITDA like NVDA today, you're looking at a trillion-dollar company.

It's more likely that Intel will be near the $500 billion mark by then unless the AI rally eclipses expectations. Revenue growth is expected to be in the 5% to 10% range in the coming years, and that's nowhere near enough to justify a 40x EBITDA valuation. CEO Lip-Bu Tan is among the best in the industry, so I wouldn't rule it out entirely. A few big-name deals with AI hyperscalers and continuous investments being poured into Intel can lay the groundwork for 20%-plus annual sales growth.

Anyhow, let's not get too ahead of ourselves. Intel is yet to build the infrastructure, so management's priority is not scaling up sales.

Intel has guided for $11.7 billion to $12.7 billion in revenue for Q1 with EPS flat. Intel exceeded its own Q4 expectations on revenue, gross margin, and EPS, but it is still guiding to a softer first quarter, which tells you the comeback is real but unfinished.

Q1 is the supply stress test, since Intel said supply is at its lowest in Q1 before improving.

The first half is the 18A ramp credibility test, since Intel says 18A is already ramping to high-volume manufacturing. The second half is the foundry demand test, since Intel is openly selling a “systems foundry” vision with customer momentum like Microsoft’s (NASDAQ:MSFT) 18A choice. Everything needs to come together smoothly before the market pays more for this stock.

I think INTC stock is overdue for some cooling since investors are paying for years of execution. This is likely because they expect Intel to receive more support from the government or bigger AI companies.

If you compare the current premium to the historical median, INTC stock is trading very expensively due to that 2027/2028 ramp-up I talked about earlier.

Either way, I don't expect a large correction from the current price of $46. A boost in profits is almost a given by 2028, and you could see the fair value jump closer to $40 by then.

I believe INTC stock can make a full recovery and possibly surge above $80 by 2030 if everything goes well. The problem is that Intel needs to build out capacity quickly. If it does not, it may miss the window where the AI rally could rapidly increase its profits.

In the near term, I don't expect the stock to gain meaningfully unless earnings reports show a swift recovery. The market is already generous with the valuation. Earnings must recover before a quote above $50 is seen as normal.

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