Intel's (INTC +1.01%) fortunes on the stock market saw a remarkable turnaround in the past three months. The once beaten-down chipmaker had missed out on multiple growth opportunities in the semiconductor sector in the past few years, but shares jumped a remarkable 62% since mid-July.
That performance is well above the gains of semiconductor peers like Broadcom and Nvidia (NVDA +2.27%) over the same time frame. A significant chunk of Intel's gains came in the past month, thanks to a flurry of positive developments. Let's see what's been going on and check whether Chipzilla can sustain its recent momentum in the coming year as well.
Intel's new partnerships give some investors hope
Though Intel has seemingly missed the artificial intelligence (AI) gravy train so far, it remains a dominant player in the client and server central processing unit (CPU) markets. Of course, the company has been losing ground to Advanced Micro Devices in these markets, but its unit share of the overall CPU market still stands at just over 75%.
NASDAQ: INTC
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This probably explains why the likes of Nvidia, SoftBank, and the Trump administration have opened their wallets for Intel. Nvidia announced a $5 billion investment in Intel last month. Both companies will "jointly develop multiple generations of custom data center and PC products that accelerate applications and workloads across hyperscale, enterprise, and consumer markets."
Specifically, Intel is going to manufacture custom server CPUs based on the x86 architecture for Nvidia's AI chip systems. Additionally, Intel will integrate Nvidia's consumer graphics cards into its client system-on-chips (SoCs). This partnership could indeed be a fruitful one for Intel. After all, Nvidia is the leading player in the AI graphics processing unit (GPU) market, and it's easy to see why it has decided to invest in Intel.
Nvidia currently offers rack-scale server systems that integrate its Blackwell GPUs with its Grace server CPUs. However, the Grace chips are based on Arm Holdings' architecture. Given that x86 chips are expected to account for 77% of the global AI server chip market in 2025, it makes sense that Nvidia has decided to invest in Intel to further strengthen its position in AI chip systems.
This bodes well for Intel, considering that it has been losing ground in the server CPU market to AMD. Intel's server CPU unit share slipped by 3.2 percentage points year over year in the second quarter of 2025, while the fall in the revenue share was more prominent at 7.2 points. So, Nvidia's move to integrate Intel's server processors is likely to give the latter's growth a boost going forward.
Additionally, Intel received a $2 billion investment from SoftBank, along with an $8.9 billion investment from the U.S. government. These two investments are likely to help Intel boost its manufacturing and research capabilities in the hopes that it can build a robust semiconductor supply chain in the U.S.
Investors would do well to note that the U.S. is the biggest AI server market in the world, with an estimated revenue share of 62% for 2025. That's why Intel investors are now bullish about the company's prospects. They hope that it will now be able to make its presence felt in the AI infrastructure space, where it has been a bit-part player for the past three years.
But has the stock gone up too much, too soon?
The red-hot rally in Intel stock of late has made the stock expensive. It's now trading at 88 times trailing earnings and 56 times forward earnings. These multiples make it significantly more expensive compared to Nvidia, which has delivered impressive revenue and earnings growth in recent years.
Intel reported flat revenue growth in the second quarter, along with a non-GAAP net loss of $0.10 per share, down from a profit of $0.02 per share in the year-ago period. The company's client computing group (CCG) and data center and AI (DCAI) business units, which account for the majority of its top line, were down by 1% from the year-ago quarter.
Intel has been taking steps to become a leaner company by reducing its workforce and by focusing on efficiency and cost-saving initiatives. This explains why analysts expect Intel to eventually end 2025 with an adjusted profit of $0.12 per share, compared to a loss of $0.13 per share last year. The good part is that its bottom line is expected to grow at an incredibly solid pace in the next couple of years.
Data by YCharts.
Intel's efficiency-focused moves and the potential improvement in sales thanks to the Nvidia partnership could eventually help it deliver the growth analysts are expecting. However, the stock's expensive valuation means that it would be better for investors to wait for tangible signs of a turnaround. Investors can buy chipmakers in much better health than Intel right now at cheaper valuations.
That seems to be the general consensus on Wall Street. Only 7% of the 45 analysts covering Intel suggest buying it now. Its 12-month median price target of $24 points toward a potential drop of 33% from current levels.
Intel's recent rally is built more on hope than on its financial performance. It will have to execute perfectly and show that its recent partnerships are capable of helping it accelerate its revenue growth once again. If that doesn't happen, it won't be surprising to see Intel give up its gains and head lower in the coming year.
