After years of strategic missteps and market share losses, chip giant Intel is regaining favor on Wall Street, buoyed by strong data center demand expectations and massive external investments.
On the eve of its closely watched quarterly earnings report, Intel's stock surged over 11% at Wednesday's close, breaking through its highest level since January 2022. This robust performance propelled the company's market capitalization past the $250 billion mark for the first time since 2022. Following an 84% gain last year, the stock has climbed approximately 35% since the start of 2026, with a cumulative increase of 149% over the past 12 months.
The dramatic reversal in market sentiment stems primarily from optimistic expectations for Intel's data center business and recognition of the aggressive reforms initiated by its new CEO, Pat Gelsinger. Gabelli Funds analyst Ryuta Makino stated bluntly in an interview, "I think this is the most optimistic people have been on the company in a long, long time; the setup near-term is very favorable."
Wall Street widely believes the earnings report, scheduled for release after Thursday's market close, will serve as a crucial test for gauging the authenticity of Intel's recovery.
Beyond performance expectations, Intel is also benefiting from a broad semiconductor sector rebound and strong backing from external strategic investors. Key stakeholders, including the U.S. government and Nvidia, strengthened the company's balance sheet through investments last year. On Wednesday, the chip sector rose broadly, with rival AMD gaining about 8% and Micron Technology rising 7%. Furthermore, overall market sentiment received a boost from U.S. President Trump's remarks ruling out the use of force to acquire Greenland.
The core driver behind reignited investor interest in Intel is the robust recovery of its server chip sales. Analysts note that while Nvidia's GPUs dominate AI workloads, major tech companies still need to purchase large quantities of Intel's traditional server CPUs as they rapidly build out data centers.
Estimates from FactSet and LSEG data project that revenue from Intel's Data Center and AI business is expected to surge nearly 29% to 30%, reaching approximately $4.4 billion. Earlier this month, KeyBanc analysts upgraded Intel's stock rating to the equivalent of "Buy" and set a $60 price target. They indicated that Intel's server CPUs for this year might already be sold out, suggesting potential price increases. "We expect excess data center demand from hyper scalers to be a meaningful tailwind this year," KeyBanc analysts wrote in their report. Ryuta Makino echoed a similar view, suggesting server CPU prices could see at least double-digit percentage increases in 2026, forming a key pillar of the bullish thesis for Intel.
Intel's comeback relies not only on product sales but also on the reshaping of its capital structure and the ambitions of its foundry business. Under CEO Pat Gelsinger's leadership, the company has significantly improved its financial health by bringing in external capital.
According to a CNBC report, the U.S. government, after investing $8.9 billion last year, has become Intel's largest shareholder. This move is partly because Intel is the only U.S.-based company capable of manufacturing advanced chips. Additionally, AI chip leader Nvidia invested $5 billion last year, becoming one of its top shareholders; SoftBank also invested $2 billion. Nvidia and Intel have reached an agreement to work on integrating Intel's CPUs into Nvidia systems.
In the foundry arena, Intel is attempting to establish itself as the world's second-largest chip contract manufacturer, behind TSMC. The company has recently heavily promoted its 18A manufacturing process, a technology viewed as comparable to TSMC's 2-nanometer process. Although this business is still seeking major anchor customers, Nvidia and Broadcom have conducted manufacturing tests, sparking market speculation about future orders.
Despite the buoyant market sentiment, Intel's fundamentals are not without flaws. Analysts expect the company's total fourth-quarter revenue to decline 6% year-over-year to $13.4 billion.
In the personal computer (PC) segment, Intel faces a mixed outlook. While it has launched the "Panther Lake" chip using the 18A process, revenue for this division is projected to grow only 2.5% to $8.21 billion. Analysts warn that rising memory prices, driven by global shortages, could increase laptop costs, potentially dampening demand. Furthermore, Intel continues to lose share in the PC market to AMD and Arm-based designs.
Margin pressure also persists. Due to the high costs associated with fixing its manufacturing operations, adjusted gross margin for the fourth quarter is expected to decline by approximately 6 percentage points to 36.5%. A Reuters report noted that while yields for the 18A process are improving month-by-month, only a small portion of chips currently meet customer standards, leaving the scale of commercial production uncertain.
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