Intel’s stock is surging as Wall Street anticipates strong quarterly results, fueled by a resurgence in demand for its server chips and promising advancements in its foundry business. The chip giant’s shares have seen a remarkable climb, gaining approximately 149% over the past twelve months, and a notable 11% jump in a single day recently, reaching their highest point since early 2022.
This optimistic outlook is largely attributed to the robust sales of Intel’s latest server processors. Analysts from KeyBanc, who recently upgraded the stock to a buy-equivalent rating, suggest that Intel’s server CPUs are experiencing such high demand that the company is likely to be sold out for the remainder of the year. This scarcity could pave the way for price increases, further bolstering Intel’s revenue. KeyBanc analysts specifically highlighted the expectation of “outsized data center demand from hyperscalers this year to be a significant tailwind” for Intel’s data center segment, setting a price target of $60 per share.
Beyond its core CPU business, Intel’s foundry services are also generating considerable excitement. The company has been actively working to establish itself as a leading foundry, aiming to rank as the second-largest player behind Taiwan Semiconductor Manufacturing Co. (TSMC) and ahead of Samsung. Intel’s recently showcased 18A manufacturing technology is considered a strong contender, with performance benchmarks suggesting parity with TSMC’s 2-nanometer process. The U.S. government has demonstrated significant backing for Intel’s foundry ambitions, investing $8.9 billion last year. This strategic investment underscores the nation’s interest in fostering domestic advanced chip manufacturing capabilities, positioning Intel as a critical player in the global semiconductor landscape.
Further bolstering Intel’s strategic position is its collaboration with Nvidia, a dominant force in AI chips and a potential major customer for Intel’s manufacturing services. Nvidia invested $5 billion in Intel last year, and the two companies have committed to integrating Intel’s CPUs with Nvidia’s AI accelerators. This partnership signifies a mutual reliance and a shared vision for optimizing AI computing infrastructure. The government’s stake in Intel has grown by $14 billion since its initial agreement, while Nvidia’s investment has appreciated by over $6 billion.
Under the leadership of CEO Lip-Bu Tan, appointed in March, Intel has undertaken significant cost-cutting measures, workforce reductions, and a restructuring of its executive team. These strategic moves are aimed at streamlining operations and enhancing the company’s competitive edge.
Looking ahead to the upcoming quarterly earnings report, analysts surveyed by LSEG anticipate a 6% year-over-year decline in overall revenue, bringing it to approximately $13.4 billion for the fourth quarter. However, projections from FactSet indicate a substantial surge in data center and AI-related sales, with an expected increase of nearly 29% to $4.4 billion. This dichotomy highlights the growing importance of these high-growth segments within Intel’s portfolio.
The broader semiconductor market also saw positive movement, with rivals like Advanced Micro Devices (AMD) and memory specialist Micron Technology experiencing gains of around 8% and 7%, respectively. This upward trend in the sector occurred amidst a generally positive market sentiment, partly influenced by geopolitical developments.
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