Intel’s rally signals relief more than revival
Strong earnings and AI optimism lift shares, but structural challenges remain unresolved.
Does the surge in Intel’s stock mark a genuine turning point, or merely a sigh of relief as fears of collapse recede for what was once the undisputed queen of the chip industry?
For now, the answer appears to lean toward the second scenario: relief rather than a full turnaround. After a prolonged period of real concern about its survival, Intel has at least stepped back from the brink under CEO Lip-Bu Tan, who took the helm about a year ago.
The recovery effort has been supported from multiple directions. The U.S. government acquired a 10% stake when Intel’s valuation had fallen to around $100 billion. Nvidia injected an additional $5 billion. A partnership with Google aims to develop cloud and AI infrastructure. And just before the earnings release, it emerged that Elon Musk plans to rely on Intel’s manufacturing for companies such as Tesla, SpaceX, and xAI.
Still, in the current race to build AI infrastructure, nearly every major player is investing broadly to avoid shortages of computing power. Intel has made meaningful progress, but competitors, chiefly TSMC, continue to push ahead.
Last Thursday, Intel reported better-than-expected first-quarter results, sending its shares up 24% and pushing the stock above its dot-com era peak for the first time. Revenue came in at $13.6 billion, a 7% increase year-on-year and ahead of forecasts.
Investors were particularly encouraged by a 16% jump in revenue from the company’s chip manufacturing division to $5.4 billion, even though it still posted a loss of $2.4 billion. The data center and AI division also impressed, growing 22% to $5.1 billion. On the bottom line, Intel significantly beat expectations, reporting earnings of 29 cents per share versus forecasts of just one cent. The company also issued a relatively strong, if cautious, outlook for the second quarter, projecting revenue of $13.8 billion to $14.8 billion.
The battered stock has now become one of Wall Street’s top performers, having doubled since the start of the year. Yet even after this rally, Intel’s market value stands at $414 billion, still far behind rivals like Nvidia and Broadcom, and even trailing AMD. Nvidia recently crossed the $5 trillion mark again, while Broadcom touched $2 trillion for the first time.
What works in Intel’s favor is a broader shift in the AI market, from training large language models to inference, where models are deployed across enterprise applications. While GPUs powered the training boom that propelled Nvidia’s rise, CPUs, long Intel’s core strength, are better suited to inference workloads.
This dynamic underpins much of the renewed optimism. However, Intel has yet to demonstrate consistent production capabilities at the most advanced nodes, including 14A and 18A, which are critical to winning major customers.
Massive funding has allowed the company to accelerate engineering efforts and expand production capacity, but it remains behind its competitors. Without the geopolitical push to localize chip production, particularly amid U.S.-China tensions, it is unclear whether companies like Tesla or Google would have committed to Intel.
Profitability remains another major concern. The company continues to burn cash, and margins have yet to show meaningful improvement, both in the latest results and in forward guidance.
On a conference call with analysts, Tan emphasized Intel’s repositioning:
“Intel is a fundamentally different company today,” Tan said. “We have taken and continue to take deliberate steps to rebuild Intel into a more competitive and more profitable company.”
He added: “In recent months, we have seen clear signs that the CPU is reinserting itself as the indispensable foundation of the AI era. CPU now serves as the orchestration layer and critical control plane for the entire AI stack,” he said. “This is not just our wishful thinking… it is evident in the demand profile for our products.”
According to the company, 60% of first-quarter revenue was tied to AI-related products, with demand for server processors strengthening over the past 90 days and expected to continue growing at a double-digit pace.
Within this broader shift, Intel’s operations in Israel are playing a central role. Karin Eibschitz Segal not only leads Intel Israel but also oversees engineering for the company’s Data Center Group globally. Her responsibilities span architecture, hardware development, system integration, and final product delivery across Intel’s AI and data center portfolio.
Israel is also home to key elements of Intel’s AI and server communications technologies division, including the development of IPU chips and collaboration with Google on one of Intel’s most strategic projects.
After a period of layoffs, Intel’s Israeli operations are beginning to talk again about hiring. Its relatively lower valuation compared to competitors could help attract talent, alongside veteran employees who may once again see upside in the company’s stock.
Despite the renewed optimism, Intel’s comeback is far from assured. Sustained growth over several quarters, improved profitability, especially in the foundry business, and consistent execution in advanced manufacturing will all be critical tests.
Another challenge is talent retention. Previous cost-cutting measures, including voluntary retirement programs, may have disproportionately affected some of the company’s strongest employees.
Until Intel can demonstrate durable progress on these fronts, the surge in its stock may reflect not a full recovery, but a market eager for a cheaper alternative in a sector where leaders like Nvidia and Broadcom already trade at premium valuations.
