In the Prologue, Diamond makes three major arguments on this topic.
First, he says that New Guineans may seem dumb when they come to towns because they are not used to the things that are in "civilized" towns. This does not mean they really are dumb, just that they are not accustomed to the setting.
The next two arguments center around the idea that New Guineans are actually smarter.
Second, he says that more intelligence is (and has been for a long time) needed to survive in the New Guinean wilderness than in European countries. Therefore, New Guineans are likely to have evolved to be more intelligent than Europeans.
Finally, Diamond argues that New Guinean lifestyles mean they are more likely to be intelligent. Europeans and Americans spend all their time being passively entertained by TVs and such while New Guineans actually have to use their brains.
So, Diamond counters the idea that Europeans are more intelligent by A) saying New Guineans only appear dumb in modern settings and B) that there are reasons to believe that New Guineans would actually be smarter than Europeans.