Intel Stock Surges on AI Demand and Foundry Ambitions
Wall Street is showing considerable enthusiasm for Intel as it approaches its quarterly earnings release scheduled for after market close on Thursday. The semiconductor giant experienced a notable surge of approximately 11% in its stock price on Wednesday, reaching levels not seen since January 2022. This upward momentum has extended a remarkable rally that saw the stock appreciate by 84% last year and by a staggering 149% over the past twelve months.
A primary driver of this optimism appears to be the robust sales performance of Intel's most recent server chip offerings. Industry observers suggest these chips are directly benefiting from increased investment in the infrastructure required for artificial intelligence development. Analysts at KeyBanc, for instance, recently elevated their rating on Intel shares to a "buy" equivalent. Their assessment points to Intel potentially having sold out its server CPU inventory for the current year, which could translate into upward price adjustments. The KeyBanc team highlighted that "strong demand from hyperscalers for their data centers this year is anticipated to be a significant advantage" for Intel's data center division, setting a price objective of $60, a notable increase from its Wednesday closing price of over $54.
Beyond its core chip manufacturing, Intel's foundry arm is also generating positive attention. Recent developments suggest that this business unit, which is still in pursuit of a primary customer, may be on the verge of securing significant orders. This potential success could position Intel as the second-largest chip foundry globally, trailing only Taiwan Semiconductor Manufacturing Co. (TSMC) and surpassing Samsung. Intel has actively promoted its 18A manufacturing technology, which is considered comparable to TSMC's 2-nanometer process. The U.S. government has become a crucial supporter of Intel, now its largest shareholder following an $8.9 billion investment last year, partly due to Intel being the sole American company capable of producing advanced semiconductor technology.
Nvidia, a leading player in AI chips and a potential client for Intel's manufacturing facilities, is also among the company's top shareholders, having invested $5 billion last year. Intel and Nvidia have initiated a collaboration to integrate Intel's central processing units (CPUs) with Nvidia's AI chips within Nvidia's systems. The government's investment in Intel has seen a substantial increase of $14 billion since its initial agreement in August, while Nvidia's stake has grown by over $6 billion since its investment in the following month.
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 leadership framework. While analysts anticipate a 6% year-over-year decline in fourth-quarter revenue, reaching approximately $13.4 billion according to LSEG data, they project a substantial surge of nearly 29% in data center and AI sales, to an estimated $4.4 billion, based on FactSet figures.
Other prominent chip manufacturers also saw gains on Wednesday. Intel competitor Advanced Micro Devices (AMD) climbed roughly 8%, and memory specialist Micron Technology rose 7%. The broader market also experienced an upswing, influenced in part by President Donald Trump's statement that he would not employ military action to secure Greenland.
