Intel experienced a dramatic surge in its stock price on Friday, driven by exceptionally strong first-quarter demand for its central processors from AI service firms. The company sold chips it had previously written off, a significant turnaround that boosted its shares by 28% in premarket trading. This rally positioned Intel's stock for a record high, potentially adding over $90 billion to its market value, surpassing its dot-com era peak.
The demand for central processing units (CPUs) in AI inference, the process of answering user queries, is poised to re-establish their importance in the industry, challenging the dominance of graphics chips in AI training. This shift has prompted Nvidia, a leader in the AI chip market, to introduce its own central processor, signaling increased competition.
Following Intel's better-than-expected first-quarter results and optimistic sales forecast, at least 14 brokerages raised their price targets. Analysts highlighted growing demand for Intel's Xeon server CPUs, essential for AI data centers.
CFO David Zinsner noted that strong pricing and tight supply in the first quarter led Intel to utilize finished goods inventory, including previously shelved legacy products, to meet customer needs. While this benefit may not extend to the second quarter, the company's strategic moves are gaining traction.
Intel's stock has already seen substantial gains this year, building on its strong performance in 2023. The company has secured Tesla as a customer for its advanced 14A chipmaking process, a key development for its contract manufacturing ambitions. Experts believe a meaningful contribution from the foundry business by 2027 would signify the completion of Intel's turnaround.