Intel's Turnaround Efforts Shine as AI Data Centers Drive Chip Demand

Intel's Strategic Shift and Market Outlook

By Arsheeya Bajwa

Investment and Stock Performance

Jan 21 (Reuters) - Intel shareholders are optimistic about the company's results like they have not been for many quarters, betting the turnaround CEO Lip-Bu Tan promised was taking root and that rapid data center build outs were fueling strong demand for its traditional server chips.

Challenges in the PC Market

A slew of high-profile investments engineered by Tan last year piqued investor interest in a stock that had crashed in 2024 following years of management missteps, including a botched AI product roadmap that led to deep competitive losses and thousands of job cuts.

New Product Developments

Intel's stock gained 84% in 2025, far outperforming the benchmark semiconductor index's 42% rise.

A $5  billion investment from Nvidia and $2  billion from SoftBank, alongside the U.S. government's stake in the company, have strengthened Intel's balance sheet and given Tan the flexibility to begin reshaping the company's manufacturing and AI strategy.

Tan has also overhauled the company's chipmaking operations and tightened what he said was a bloated management structure.

"It's the most optimistic, I think, people have felt about the company in a long time; the near-term dynamic's set up very well," said Ryuta Makino, analyst at Intel investor Gabelli Funds. 

"That's really the big Intel bull case here - I think there will be at least a double-digit server CPU (central processing unit) price hike in 2026."

At least 10 brokerages have raised their price targets or ratings for Intel over the last two months, indicating higher expectations from the company. 

Intel is likely to report a more than 30% jump in its data center business to $4.43 billion for the quarter ended December, according to data compiled by LSEG.

The jump could be attributed to big tech companies building out advanced data centers that need Intel's traditional server chips and CPUs alongside graphics processors made by the likes of Nvidia.

Sales in Intel's personal computer unit likely rose 2.5% to $8.21 billion. 

A LONG WAY TO GO

Intel has been consistently losing share in the PC market to rival AMD and chip blueprint designer Arm, and may now also face weaker PC demand as a global shortage of memory chips has boosted memory chip prices and made laptops more expensive.

"While we remain bullish on data center demand, we believe PC demand may moderate from increasing memory pricing, given memory accounts for 25% to 30% of PC bill of materials," UBS analysts said in a note earlier this month.

The brokerage expects a drop of 4% in global 2026 PC shipments, compared with the over 3% growth it projected earlier.

Intel's refreshed product lineup may help plug some losses. 

The company has started shipping its new "Panther Lake" PC chips - the first product made using Intel's make-or-break 18A manufacturing technology. Its prior-generation PC chips were largely made by chip contractor TSMC. 

Intel has long been its own largest manufacturing customer, but with its growing political goodwill, the Street is hoping for new foundry clients. 

"We really like Lip-Bu Tan, but more importantly – more powerful people like President Trump, Secretary Lutnick, (Nvidia CEO) Jensen Huang and even (AMD CEO) Lisa Su like him even more as a business partner," Melius Research analysts said in a note.

Reuters has reported that Nvidia and Broadcom have run manufacturing tests with Intel, but much remains uncertain as only a small percentage of the chips printed via 18A have been good enough to make available to customers. 

Intel has said its yields, or the number of good chips per silicon wafer, are improving monthly.

Pressured by poor yields, Intel's adjusted gross margin is expected to have dropped about 6 percentage points to 36.5% in the December quarter. 

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Sayantani Ghosh and Shinjini Ganguli)