Investing.com -- Bank of America raised its Intel stock price target to $96 from $56 but maintained its Underperform rating, arguing that a potential foundry deal with Apple, while significant, is already reflected in the stock’s current valuation.

The Wall Street Journal reported on Friday that Apple and Intel have reached a preliminary agreement for the chipmaker to manufacture some of the chips that power Apple devices. BofA estimates the deal could eventually generate around $10 billion in annual foundry sales for Intel by 2030, based on a roughly 25% share of Apple’s chip volumes.

Intel shares surged 14% on Friday to a new all-time high closing price of $124.92. The jump extended the stock’s impressive year-to-date gain to nearly 240%.

BofA’s price target hike comes as a result of a new sum-of-parts valuation framework and a higher outlook for the server CPU market, which the bank now sees reaching $120 billion by 2030, up from a prior estimate of $80 billion.

In the near term, M-Series chips used in MacBooks and iPads are seen as the likely initial target product for Intel, with potential expansion to A-Series processors for iPhones over time.

"While discussions are likely still ongoing, we believe this is related to earlier INTC mgmt commentaries that Intel Foundry is engaged with customers to manufacture ARM-based processors (such as Apple SoCs)," BofA analysts led by Vivek Aryas said.

But the team was careful to note it has not incorporated the Apple deal into its formal financial model, pending greater clarity on the terms. The analysts also flagged that even if a deal is formally announced, it would still require two to three years of capital expenditure buildout, qualification, and ramp-up.

Gross margins would likely be pressured in the early stages due to depreciation, low yields, and startup costs, and the analysts said Intel’s target of reaching foundry operating breakeven by 2027 "could be delayed by another one to two years."

"We acknowledge the potential opportunity and alongside the recent increase in industry server CPU TAM outlook...However, we reiterate Underperform as we believe these upsides are already fully valued, and we believe CPU peers AMD/ARM are better positioned to benefit (share gainers) of the rising TAM," the analysts wrote.