For nearly two decades, Intel (INTC) dominated the CPU market. This CPU dominance made Intel one of the world's most profitable semiconductor companies. However, with the start of the artificial intelligence (AI) boom, Nvidia’s (NVDA) GPUs became the center of attention, and CPUs became yesterday's technology, with Intel losing its edge. Ironically, AI is now restoring one of Intel’s core strengths. Intel’s Q2 earnings suggest that AI is evolving, and its decades-long leadership in CPUs may once again be turning into a competitive advantage.
Nonetheless, higher capex spending concerns continue to weigh on AI stocks. As a result, despite a better-than-expected quarter, INTC stock closed 7.8% lower on Friday and is still dropping in early morning trading today, but has still surged 146% year-to-date (YTD), outperforming the broader market.
More Top Stocks Daily: Go behind Wall Street’s hottest headlines with Barchart’s Active Investor newsletter.
www.barchart.com AI Isn’t Just a GPU Story Anymore, and It Is Reviving Intel’s Strength
In the Q2 earnings call, management emphasized that AI is now evolving from training toward inference, agentic AI, and multi-agent systems. Therefore, CPU density inside data centers continues to rise. Rather than seeing CPUs ousted, Intel sees them becoming an increasingly important part of AI infrastructure. Intel's Data Center and AI (DCAI) segment reflects management's optimism about its core CPU business. Revenue for the segment increased 59% year-over-year (YoY) to $6.3 billion in revenue in Q2, owing to strong demand from hyperscale cloud providers and enterprise customers. Now, AI-related businesses account for about 70% of the company’s revenue. Additionally, Q2 server growth was the highest on record, with the Xeon 6 being Intel's fastest-ramping product in history.
Its Client Computing and Physical AI Group (CCPG) segment also generated $8.9 billion in revenue, up 13% YoY, with AI PC revenue accounting for roughly two-thirds of client revenue. The company has already brought Intel 18A into full-scale production across more than 400 Series 3 PC designs. Management believes enterprise AI adoption and emerging edge AI applications could become meaningful long-term growth drivers for its CPU business. Intel Foundry revenue also increased by 31% from the year-ago quarter. Total revenue in the quarter surged 25% YoY to $16.1 billion, while adjusted earnings per share landed at $0.42 compared to a loss of $0.10 in the year-ago quarter. Both revenue and earnings beat consensus estimates.
CEO Lip-Bu Tan is confident that Intel is well positioned, thanks to its three strategic assets: the x86 CPU franchise, advanced packaging, and its wafer foundry network. Intel also expects strong CPU demand for the full year, with strong double-digit industry unit growth in 2026, with the momentum extending until 2028. CEO Tan ended the earnings call with a strong statement: “We are the only company that can design, manufacture, and build the entire range of computing solutions from general-purpose, traditional CPUs and GPUs to more purpose-built ASICs and CPUs optimized for agentic AI.”
Like most semiconductor companies, Intel also raised its 2026 capital expenditure outlook to more than $20 billion and expects 2027 spending to increase even further. The main reason for rising capital expenditures is the belief that demand for compute will remain strong for years as enterprises continue adopting AI across industries. Companies generally don't increase capital spending aggressively unless they see sustained customer demand.
What Is Wall Street Saying About INTC Stock?
Overall, Wall Street maintains a consensus "Moderate Buy" rating for INTC stock. Of the 45 analysts covering the stock, 11 rate it a "Strong Buy," one says it is a "Moderate Buy," 31 rate it a "Hold," and two suggest it is a "Strong Sell." According to Goldman Sachs analyst James Schneider, Intel posted a better-than-expected quarter, with its traditional CPU businesses surprising positively. This might push the stock higher over the short term. However, he is still not convinced to upgrade INTC and retains a “Neutral” rating with a $150 price target. The average target price of $108.74 suggests the stock can climb by 24% from current levels. However, its high price estimate of $200 implies an upside potential of 127% over the next 12 months.
For much of the AI boom, the market rewarded GPU leadership while CPUs got very little attention. However, now the picture is changing. Intel still has a lot of work to do, and its turnaround is still slowly progressing. However, its second quarter showed that AI is no longer a threat to its legacy business.
www.barchart.com On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
Despite Challenges, AST SpaceMobile Stock Could Make a Compelling Options Trade for Contrarians Here ConocoPhillips Stock Has Attractive Short-Put Yields for One Month As Oil Price Rise Mag 7 Q2 Earnings Haven’t Been So ‘Magnificent.’ What META, MSFT, and AMZN Need to Report to Turn the Tide. Option Volatility And Earnings Report For July 27-31