Key Moments
- Intel’s CPU demand from AI service providers was so strong in the first quarter that it sold previously written-off inventory.
- The stock jumped 28% to $85 in premarket trading, set to exceed its dot-com era record and potentially add more than $90 billion in market value.
- At least 14 brokerages raised Intel’s price targets after its first-quarter beat and upbeat sales forecast, citing robust demand for Xeon server CPUs.
AI Inference Surge Drives CPU Revival
Intel’s central processing units are experiencing a powerful resurgence, with first-quarter demand from companies delivering artificial intelligence services so strong that the firm sold chips it had previously written off. The sharp recovery in its CPU business ignited a major rally in the stock on Friday.
In premarket trading, Intel shares climbed 28% to $85, positioning the stock to open at an all-time high that would overtake its peak from the dot-com era in 2000. At that price, the move would increase Intel’s market capitalization by more than $90 billion, lifting its total value above $420 billion.
Optimism spread across the broader CPU ecosystem as well. Shares of Advanced Micro Devices (AMD) and Arm each advanced 7%, reflecting increasing confidence that AI inference – the stage where artificial intelligence systems respond to user queries – could bring central processors back to the center of the computing landscape after years in which graphics processors, widely used for AI training, dominated attention.
Competitive Landscape: Nvidia Eyes CPU Territory
Nvidia, which has been the primary beneficiary of the recent AI-driven demand for graphics processing units, has also taken note of the shifting dynamics. Last month, it introduced a new central processor, marking a rare push into an area it had largely left to competitors in the past.
Despite that strategic move, Nvidia’s shares were little changed on Friday.
Wall Street Reassesses Intel’s Prospects
Following Intel’s better-than-expected first-quarter results and a revenue outlook that topped forecasts, at least 14 brokerages raised their price targets on the stock. HSBC highlighted mounting demand for Intel’s Xeon server CPUs that power AI-focused data centers as a key driver of its improved view.
Intel Chief Financial Officer David Zinsner said the company’s outlook was influenced in part by higher pricing, and he noted that supply conditions were tight in the first quarter. That situation prompted Intel to turn to finished goods inventory and sell components it had not anticipated moving.
“It was either de-spec product or legacy product we had shelved and then we worked with customers. That helped a lot. I am not sure we have that benefit in the second quarter,” he said.
Inventory Utilization and AI CPU Demand
| Factor | Details |
|---|---|
| Primary demand driver | AI service providers buying Intel CPUs for inference workloads |
| Inventory action | Sale of de-spec or legacy chips previously written off and shelved |
| Pricing impact | Forecast partly supported by higher prices |
| Supply conditions | Tight in the first quarter, leading to use of finished goods inventory |
Valuation, Turnaround, and Foundry Ambitions
Intel’s stock has already advanced about 80% this year, following an increase of about 84% last year, as its turnaround gains momentum under CEO Lip-Bu Tan after an extended period of operational setbacks.
The company now trades at roughly 90 times its 12-month forward earnings estimates, its highest multiple on record. That valuation significantly exceeds the 37 times for AMD and 22 for Nvidia.
Earlier in the week, Intel achieved a symbolic milestone in its contract manufacturing strategy by winning Tesla as a customer for its upcoming 14A chip production process, which is linked to Elon Musk’s planned Terafab AI chip facility.
“If the foundry business can start contributing in a meaningful way in 2027 – as expected – that should really show that the company’s turnaround is complete,” said Bob O’Donnell, president and chief analyst at TECHnalysis Research.
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