Intel shares surged as much as 26 per cent to a record high on Friday after the US chipmaker’s results added to confidence that its ambitious turnaround plan was paying off.
Chief executive Lip-Bu Tan hailed a “fundamental” change at a company long regarded as America’s chipmaking champion, that was fighting for survival last year after losing ground to Asian rivals and a series of strategic mis-steps.
“A year ago the conversation about Intel was about whether we could survive,” Tan told analysts on Thursday after the group reported first-quarter results.
“Today it’s about how quickly we can add manufacturing capacity . . . to meet enormous demand . . . This is a fundamentally different company today,” said Tan, who took the top job last year after his predecessor Pat Gelsinger was ousted.
In the latest evidence of its recovery, Intel forecast revenues of between $13.8bn and $14.8bn for the current quarter, beating Wall Street’s expectations of $13bn as the AI boom drives demand for its products.
Intel shares hit $84.80 on Friday morning, eclipsing a record high set in 2000, and extending a rally that began when President Donald Trump announced the US government would take a nearly 10 per cent stake in the chipmaker and which accelerated after it partnered with Elon Musk on his ambitious Terafab chip factory.
Stacy Rasgon, analyst at Bernstein, credited Tan with restoring Intel’s focus on engineering, cutting costs and levering his connections as a “relationship guy who knows everyone in the industry” to drive sales.
“I don’t think the stock is necessarily trading right now on earnings, but it’s a narrative, and the narrative — no matter what you might think of the fundamentals — is going their way right now,” Rasgon said.
Intel reported first-quarter revenue of $13.6bn, up about 7 per cent from a year ago, which beat analysts’ estimates of $12.4bn.
It has benefited from Big Tech groups pouring hundreds of billions of dollars into AI data centres, for which Intel supplies central processing units that work alongside the advanced processor chips designed by the likes of Nvidia and mainly manufactured by rival Taiwan Semiconductor Manufacturing Company.
Intel’s shares have more than tripled over the past year after it received investments from Nvidia and SoftBank following last August’s news that the US government would invest in the company.
Those shares will be granted over time, alongside payments made by the Department of Commerce to the company under the US Chips Act. According to a filing last month, the US owns 8.6 per cent of Intel, a stake worth $35.4bn after Friday’s gains.
Intel’s recent partnership for the Terafab facility and its decision to repurchase its equity stake in a chip factory in Ireland from private investment group Apollo have added to investor confidence in its manufacturing turnaround.
The US chipmaker has pumped billions of dollars into a lossmaking strategy to regain its position as a world-leading semiconductor manufacturer to rival TSMC, a risky bet that cost Gelsinger his job.
Under pressure from Trump, Tan has continued a slimmed-down version of the chipmaking push. Since taking charge, the CEO has cut 15 per cent of its workforce and abandoned costly manufacturing projects in Germany and Poland.
Bank of America analysts on Friday warned Intel was continuing to “burn cash” to build up its foundry business and that its growth outlook remains well below that of peers.
The AI boom has mainly benefited Intel’s CPU business, but analysts said it could begin to see orders for more advanced chips if industry leader TSMC is unable to meet the huge demand.
“The US needs a leading-edge foundry and we are finally getting enough proof that Intel can be that,” said Daniel Newman, CEO at research firm The Futurum Group. “TSMC is a stalwart of the industry, but it doesn’t matter because we simply can’t build enough chips. The world needed a second choice.”
Intel’s data centre and AI products brought in $5.1bn in revenue in the first quarter, far surpassing expectations. The company said the shift from AI model training to the “inference” computing required to run the models meant more CPUs were needed for each GPU.
Tan said that for the past few years the story around AI computing was “almost exclusively” about GPUs and other “accelerator” chips, but the CPU was proving to be an “indispensable foundation of the AI era”.
Intel reported a net loss of $3.7bn, which it blamed on a $3.8bn writedown of goodwill related to its acquisition of Mobileye in 2017. On an adjusted basis, it reported net income of $1.5bn.
Chief financial officer David Zinsner cautioned that Intel, along with the rest of the chip industry, was still feeling the squeeze from a constrained supply of memory, wafers and other critical supplies.
Its chip manufacturing business reported revenue of $5.4bn, above the $4.6bn analysts expected. However, this came mostly from Intel manufacturing its own products. It hopes to land external customers in the second half of this year.
Musk on Wednesday expressed confidence in Intel’s upcoming 14A manufacturing process for advanced chips, saying he planned to use it in his vast factory to supply SpaceX and Tesla. It would make him the first major customer for 14A.
Intel said it was hitting internal targets for the yield of its current 18A manufacturing process, the measure of its efficiency. It said 14A was showing a better yield than 18A at the equivalent stage in its development.