Intel saw demand for its central processing units from firms running AI services strengthen so much in the first quarter that the company moved and sold chips it had previously written off, an outcome that propelled the stock sharply higher on Friday.
Shares rose more than 24% in early trading to $83, eclipsing their dot-com era high reached in 2000 and lifting Intel's market capitalization above $416 billion. Competitors AMD and Arm each climbed over 11% as investors became more convinced that inference - the step in which artificial intelligence produces answers to queries - could return central processors to a central role after years in which graphics chips dominated AI training.
Nvidia, the graphics-chip leader that has been at the center of the AI boom, also reacted to the changing competitive landscape. The company introduced a new central processor last month, marking a rare move into a field it had largely left to competitors, and its shares were up more than 1% on Friday.
Market analysts responded quickly to Intel's better-than-expected quarterly performance and guidance. At least 23 brokerages raised their price targets on Intel shares following the results and a sales forecast that exceeded Wall Street estimates. HSBC specifically highlighted growing demand for Intel's Xeon server CPUs in AI data centers. The stock's median price target stood at $75, up from $46.50 a month earlier.
Intel's chief financial officer, David Zinsner, said the company's forecast was partly driven by higher prices and that supply was tight in the first quarter, which led Intel to pull from finished-goods inventory and sell chips 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.
Including the gains on Friday, Intel shares have climbed more than 120% so far this year, following a roughly 84% advance last year, as the company's turnaround progresses under CEO Lip-Bu Tan after several years of missteps. The stock now trades at about 90 times its 12-month forward earnings estimates - a record high for the company - compared with 37 times for AMD and 22 times for Nvidia.
Earlier in the week, Intel achieved a symbolic endorsement of its foundry ambitions by winning Tesla as a customer for its next-generation 14A process, linked to Elon Musk's planned Terafab AI chip complex. Industry observers said that if Intel's foundry division begins to contribute meaningfully in 2027, as expected, it would be a strong indicator that the company's turnaround is complete. "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.
The company also drew attention from algorithmic stock-selection tools. ProPicks AI evaluates Intel alongside thousands of other firms each month using more than 100 financial metrics. According to materials describing the tool, it uses AI to generate stock ideas by assessing fundamentals, momentum and valuation without bias. Examples of notable past winners cited by the tool included Super Micro Computer, with a listed gain of +185%, and AppLovin, with a listed gain of +157%.
Investors and market participants will be watching whether the inventory drawdown and the sale of previously shelved products represent a one-time benefit concentrated in the first quarter, as Zinsner cautioned, or a more sustained reshaping of demand that could support stronger output and pricing for Intel's data-center CPUs going forward.
Sectors and market impacts noted in the report
- Semiconductor stocks, including central-processing-unit makers and graphics-chip makers, responded to shifting demand dynamics tied to AI inference.
- Data center infrastructure and AI service providers are directly implicated by rising demand for server CPUs.
- Foundry and contract manufacturing prospects for Intel gained attention following the Tesla agreement tied to the 14A node.