Shares of Intel (INTC +4.71%) were rallying on Friday, with shares up 5.5% as of 11:52 a.m. EDT.
Intel is up strongly year to date, even though the stock pulled back from recent highs following its Jan. 22 earnings report. However, the stock has been recovering this week and is now approaching its multi-year highs once again.
Today, the entire AI-related semiconductor sector was moving higher on the back of massive capital spending forecasts from all the major cloud companies, especially Amazon (AMZN 7.68%), which announced a $200 billion 2026 spending plan last night.
In addition, Reuters reported that both Intel and rival Advanced Micro Devices (AMD +7.05%) are raising server CPU prices by as much as 10% in the Chinese market amid surprising shortages.
NASDAQ: INTC
Key Data Points
Traditional CPUs: Back in fashion?
The traditional server CPU market has had a dormant few years following the generative AI boom, as cloud infrastructure providers devoted most of their capital spending toward AI accelerators while deferring investments in their traditional server chips.
However, not only is traditional cloud infrastructure due for a refresh, but traditional CPUs are now in demand as head nodes in AI servers and for agentic AI inference applications. While GPUs are still required to run large models, CPUs can run small and mid-sized models locally.
In fact, in late 2024, Amazon reached an agreement with Intel to produce custom Xeon 6 chips, in which Amazon would co-develop a version of Intel's Granite Rapids server chip. Therefore, when Amazon forecast stunning $200 billion in capital expenditures for 2026 during last night's earnings call, at least some of that is likely to go to Intel.
Additionally, last night, Reuters reported that both Intel and AMD have notified Chinese customers of long lead times of up to 6 months for server CPUs, with Intel reportedly hiking prices by more than 10%, though pricing varies by contract.
Last month, Intel's first-quarter forecast disappointed, but management attributed the tepid guidance to a supply shortfall. Specifically, Intel was taking some of its older PC manufacturing lines offline and converting them to produce tiles for Intel's server chips. The new server chip output won't come online until the end of the first quarter, leading to a supply shortfall that won't be alleviated until later in the year.
Image source: Getty Images.
Intel's rally may continue
If Intel can grow both its supply output and expand margins on its server CPU chips, there could be much more upside to 2026 analyst estimates. That's because it now appears Intel will be able to fill its Intel 3 Ireland fab with server chips, while its new Panther Lake CPU chip, built on its new 18A fab in Arizona, ramps up to fill the lost output from the older PC chips Intel is taking offline.
The new Panther Lake output should also have better prices and margins than the older products, given that the new chip is built on Intel's cutting-edge 18A node and garnering excellent reviews in the early days of its launch.
So if you combine Intel 3 server CPUs being sold out at higher prices along with the ramp of Panther Lake, the second half of 2026 could see a significant acceleration in Intel's revenue and profits.
