Intel stock rises on analyst upgrade citing data center AI demand, ‘significant progress’ in manufacturing

Intel ( INTC ) stock climbed more than 5% on Tuesday as investment firm KeyBanc upgraded the shares to Overweight from Sector Weight, citing the chipmaker’s advances in its manufacturing business and demand for its chips from AI data centers.

Analyst John Vinh said in a note to clients on Tuesday that Big Tech’s demand for chips and servers to power AI is leading to higher sales of Intel CPUs — central processing units, or more traditional computer chips used in conjunction with AI chips such as Nvidia’s ( NVDA ) GPUs to train and run artificial intelligence models. Vinh said checks of his supply chain show Intel is “almost sold out for the year” in data center server CPUs and could raise chip prices.

Vinh also cited “significant progress” in Intel’s manufacturing business.

Intel worked to revive its manufacturing arm, Intel Foundry Services (IFS), as its chips lost ground to AMD (AMD) and Arm (ARM). The company fell into a vicious cycle: Manufacturing stumbles hurt the competitiveness of its chips, and softer chip sales left its factories underutilized, which only made manufacturing turnaround more difficult. Early reported tests of Intel’s latest manufacturing process, 18A, by Nvidia and Broadcom ( AVGO ) failed to result in major deals for Intel.

But a new CEO, investments from the US government and Nvidia, and the successful launch so far of PC chips made with 18A have increased investor confidence in Intel’s ability to right the ship.

In what would be a major boost for IFS, Vinh said checks of its supply chain in Asia indicate that Intel has signed up Apple ( AAPL ) as a customer to use its next-generation 18A-P manufacturing process to make low-end PC chips for its Macs and iPads. In terms of semiconductors, Intel’s recently launched 18A process node represents the latest generation of its chip fabrication technology, and 18A-P is an advanced, next-generation version of that node.

Apple’s potential deal was first predicted by analyst Ming-Chi Kuo in late November, sending Intel shares soaring. Vinh called Intel’s rumored partnership “the first victory of the big whale design.”

The KeyBanc analyst also said he believes the two tech firms are in discussions for Apple to use Intel’s next process, 14A, to make low-end chips for iPhones in 2029.

Intel and Apple did not immediately respond to Yahoo Finance’s request for comment on the possible agreements.

Meanwhile, Vinh said the 18A yield improvement — the percentage of chips a manufacturer produces from a silicon wafer that functions correctly — is “enough to convince us that it can be credible to be the #2 foundry supplier in the industry ahead of Samsung.” The chip manufacturing industry has only three large-scale players: the major, Taiwan-based TSMC (TSM), Korea’s Samsung (005930.KS), and U.S.-based Intel.

In addition, Vinh said that Big Tech cloud players are evaluating Intel’s advanced packaging technology for their custom AI chips. Packaging refers to the assembly of chips once they are already produced. Although that doesn’t mean Intel actually manufactures Big Tech’s custom AI chips, the chip packaging alone “helps kick-start INTC’s entry” into the AI ​​market, Vinh wrote.

The rise in Intel shares Tuesday puts the stock up nearly 140% over the past year. Vinh has a $60 price target on the stock, and shares traded around $46.70 late Tuesday morning.

Growing demand for computing linked to Big Tech’s torrid pace of spending on AI data centers also prompted Vinh to upgrade Intel rival AMD to Overweight by Sector Weight, sending shares in the latter 5% higher on Tuesday.

Intel senior vice president Jim Johnson speaks at the launch of Core Ultra Series 3 chips at CES in Las Vegas. (Photo: Intel)

Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.

Click here for the latest technology news that will impact the Stock Exchange

Read the latest financial and business news from Yahoo Finance

Leave a Comment