Intel shares soared 20% after a strong report. It has started to get a return on AI

Shares of chipmaker Intel rose by almost 20% after the publication of the quarterly report, which was significantly ahead of Wall Street expectations, writes CNBC. The market took it as a demonstration of signs of recovery after several difficult years for the company, the channel notes. Intel is becoming the beneficiary of a large-scale build-up of computing infrastructure for AI, Bloomberg comments.

Quotes of Intel soared on the extended trading on Thursday by 19.7%. If such dynamics continues after the opening of the next session, the shares will update the record value. The main trading on April 23, the company's securities ended with a growth of 2.3%, and since the beginning of the year rose in price by more than 80%.

In the first quarter, Intel's revenue increased by 7.2% year-on-year to $13.58 billion. Analysts from Wall Street, according to LSEG, expected only $12.42 billion, reports CNBC. In five of the last seven quarters, the company has shown a decline in revenue, the channel emphasizes.

Adjusted earnings came in at $0.29 per share, while the market was pricing in earnings of just $0.01 per share.

Intel recorded the strongest growth in the data center segment, where it finally started to benefit from AI amid a sharp increase in demand for central processing units (CPUs). Revenue in this area grew by 22% to $5.1 billion.

The company expects current quarter sales to bring in between $13.8 billion and $14.8 billion and adjusted EPS of $0.2. That's also higher than analysts had anticipated. Bloomberg called this forecast impressive.

Intel's report shows that demand for data center chips has turned toward its flagship central processing unit (CPU), the Xeon, Bloomberg points out. The previously sluggish CPU market has revived as the shift to agent-based AI has pushed computing needs beyond the graphics processing units (GPUs) that have dominated so far.

"CPUs are once again becoming the indispensable backbone of the AI era," Intel CEO Lip-Bu Tan said at the conference call. - That's not just our expectations - that's what we're hearing from customers."

Intel has yet to bring to market the kind of AI gas pedal that has made Nvidia the semiconductor industry leader, Bloomberg notes. At the same time, Nvidia and other market players are now increasingly focused on producing microprocessors needed to coordinate the work of AI in data centers. Such computing has long been the area of dominance of Intel's Xeon line, which once held more than 99% of the market, the agency recalls.

"A year ago, the conversation about Intel was about whether we could survive," said Tan, "Today, it's about how quickly we can ramp up production capacity and scale shipments to meet the tremendous demand for our products.

Core Ultra Series 3 processors molded with Intel's new 18A technology began selling in PCs in January, and the new Xeon 6+ server processors hit the market in March. Shortly thereafter, Google committed to using multiple generations of Intel chips in its data centers.

"Everybody is starting to send orders to Intel, and I think we're just at the beginning of that process," Thomas Hayes, chairman of Great Hill Capital, an Intel investor, said on Bloomberg. - The situation has gone from despondency to euphoria in a very short period of time."

Intel is pursuing an unusual strategy in the industry: as an integrated manufacturer, the company designs its own chips and produces them at the same time, CNBC explains. Most other manufacturers outsource expensive production to such giants as Taiwan Semiconductor Manufacturing Company, Broadcom and others. At the same time, the chipmaker has started to develop contract manufacturing - taking orders from other companies. The revenue of Intel's contract manufacturing grew by 16% to $5.4 billion, although a significant part of it falls on the production of its own chips. The company did not announce any new customers. The key task for the chipmaker is to convince TSMC's customers to switch to Intel's technology, CNBC notes.

Intel is already planning to launch production of processors using 14A technology after 2028. At the conference call, Tan noted that "several customers" are already "actively evaluating the technology" and its development is moving faster than it did with 18A.

One potential customer could be Elon Musk. Intel announced earlier this month that it would join his Terafab project in Austin to "design, manufacture and package ultra-performance chips" for SpaceX, xAI and Tesla. During Tesla's conference call on Wednesday, Musk confirmed that the company plans to use Intel's future 14A process technology to produce chips at the facility. Intel shares rose in price afterward.

This article was AI-translated and verified by a human editor