Intel (INTC) stock climbed more than 7% Tuesday as investment firm KeyBanc upgraded 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 Tuesday that Big Tech’s demand for chips and servers to power AI is leading to higher sales of Intel’s CPUs — central processing units, or more traditional computer chips used alongside AI chips such as Nvidia’s (NVDA) GPUs to train and run artificial intelligence models. Vinh said his supply chain checks show Intel is “almost sold out for the year” in data center server CPUs and may raise prices on the chips.
Vinh also cited “significant progress” in Intel’s manufacturing business.
Intel has worked to revive its manufacturing arm, Intel Foundry Services (IFS), just as its chips have lost ground to AMD (AMD) and Arm (ARM). The company has fallen into a vicious cycle: Manufacturing stumbles hurt the competitiveness of its chips, and softer chip sales left its factories underutilized, which only made the manufacturing turnaround harder. 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 so-far successful launch of PC chips made with 18A have buoyed investor confidence in Intel’s ability to right the ship.
In what would be a major boost for IFS, Vinh said his supply chain checks in Asia indicate that Intel has signed Apple (AAPL) as a customer to use its next-generation manufacturing 18A-P process to make low-end PC chips for its Macs and iPads. In semiconductor terms, Intel’s recently launched 18A process node represents the latest generation of its chip fabrication technology, and 18A-P is an advanced, upcoming version of that node.
The potential Apple deal was first predicted by analyst Ming-Chi Kuo in late November, sending Intel shares soaring. Vinh called the rumored partnership Intel’s “first big whale design win.”
The KeyBanc analyst also said he believes the two tech firms are in discussions for Apple to use Intel’s upcoming 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 deals.
Meanwhile, Vinh said 18A’s improving yield — the percentage of chips that a manufacturer produces from a silicon wafer that function correctly — is “enough to convince us it could credibly be the #2 foundry supplier in the industry ahead of Samsung.” The chip manufacturing industry has just three large-scale players: the leading, Taiwan-based TSMC (TSM), Korea’s Samsung (005930.KS), and US-based Intel.
Additionally, Vinh said Big Tech cloud players are evaluating Intel’s advanced packaging technology for their custom AI chips. Packaging refers to assembling chips once they’re already produced. Though this wouldn’t mean Intel actually manufactures Big Tech’s custom AI chips, packaging the chips alone would “help kickstart INTC’s entrance” into the AI market, Vinh wrote.
Intel shares’ rise Tuesday puts the stock up nearly 140% over the past year. Vinh holds a $60 price target on the stock, and shares traded around $46.70 late Tuesday morning.
Rising demand for compute linked to Big Tech’s torrid pace of spending on AI data centers also prompted Vinh to upgrade Intel rival AMD to Overweight from Sector Weight, sending shares in the latter 5% higher Tuesday.
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
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