Intel is down 27% from June record highs. How it can reverse the slide
Investors will be watching for two key updates when Intel reports earnings after Thursday’s closing bell: stronger AI server CPU growth and further progress in its foundry business. The report comes at a critical time for optimistic investors like us at the Club. After a blistering rally throughout the spring and into late June, the stock has pulled back, falling more than 27% from its record high close of nearly $141 per share on June 22. That decline has less to do with any breakdown in the fundamentals for Intel the company and more with a larger sell-off in the semiconductor sector as investors reassess whether the hyperscalers — Intel’s customers — can continue to spend aggressively on their artificial intelligence buildouts. As one of the best-performing stocks in the group, posting a 280% gain this year to its June peak, Intel was vulnerable to some profit-taking. So, what can Intel do to reverse the trend? First, investors want proof that demand for its central processing units (CPUs) remains high and that Intel can meet it. Often described as the brains of a computer, CPUs manage the instructions and tasks that keep systems running. Because of this, they’ve become a valuable commodity in artificial intelligence too, as AI computing shifts from model training to inference, or the stage where AI models respond to user requests and perform tasks. In particular, the rise of more advanced AI systems capable of autonomously completing multi-step tasks is driving much of the CPU demand right now. This shift has thrust Intel’s chips into a spotlight once reserved for so-called AI accelerators, especially Nvidia ‘s graphics processing units (GPUs) and Google’s in-house tensor processing units (TPUs). That opportunity, however, has led to some supply constraints. First-quarter revenue came in at $13.6 billion, $1.4 billion above the midpoint of the company’s guidance. But Intel CFO David Zinser said at the time on the post-earnings call back in April that revenue would have been “meaningfully higher” if not for demand outpacing available supply. On Thursday evening, we want to see if Intel was able to ramp up supply. Enter Intel’s still-nascent foundry business to help meet demand for its own processors, along with a new revenue stream for manufacturing chips designed by other companies. This dual role distinguishes Intel from its rival data center CPU designers, especially Advanced Micro Devices and Nvidia, and the tech giants with custom silicon, such as Amazon and Alphabet ‘s Google. All of these companies rely on a third-party manufacturer, Taiwan Semiconductor (TSMC), to bring their chip designs to life. Intel is unique among advanced chip designers because it still operates its own factories, which are known as foundries in the chip industry. “Intel has, as of right now, the most clean room space expansion opportunity sitting before it,” Ben Bajarin, CEO and principal analyst at Creative Strategies, a tech research firm. Bajarin expects Intel to raise its capital expenditures (capex) on factories, part of which will go to expanding cleanrooms, the ultra-controlled environments where advanced chips are made. The goal: become a reliable alternative source of chips for companies that have historically relied on TSMC, the industry’s dominant player. “They can add capacity in their foundries, largely here in the United States, some in Ireland as well, faster than [TSMC] can,” Bajarin added. The Taiwan-based chip manufacturer has reached full capacity, leaving reliant customers in need of other options. That’s where Intel becomes a natural shoo-in. Intel has recently taken steps to expand capacity. Last week, it announced plans to invest roughly $5.7 billion in its Leixlip, Ireland, facility to increase production of its Xeon-brand server CPUs and other products. While the investment is aimed primarily at meeting demand for Intel’s own chips, it also expands the company’s manufacturing footprint, supporting its longer-term foundry ambitions. On Tuesday, Intel’s foundry division landed a deal with cybersecurity firm Fortinet to produce its next-generation security chips. This is the first announcement of this kind for the division under Intel CEO Lip-Bu Tan, who took over at Intel in March 2025. Other recent wins for the foundry unit include both manufacturing and packaging opportunities for companies like Apple , MediaTek, and Elon Musk’s Terafab project. While the Apple-Intel deal has not been confirmed by either company, President Donald Trump has said the two American tech giants have an agreement. The U.S. government became Intel’s largest shareholder last year. INTC YTD mountain Intel YTD RBC Capital analyst Srini Pajjuri said that supply constraints are working in Intel’s favor in other ways as well. With demand exceeding supply, Pajjuri thinks the company can prioritize higher-value server CPUs, improving product mix while also gaining more pricing power because customers have fewer options. This idea of pricing power is one of the key ways to “manage” through the constraints and still meet the high bar of Wall Street. Being able to raise prices, while bringing on a bit more supply to narrow (but not close) the demand imbalance, is one way to deliver upside to Wall Street expectations. There is a question about whether Intel’s yields, or the percentage of chips in a batch that work and can be sold, can improve enough to match Taiwan Semiconductor’s output. Pajjuri said that parity with Taiwan Semi doesn’t matter. “Intel doesn’t have to be on par with TSMC to make progress,” Pajjuri argued. “As long as they get close to where TSMC is, I think they have a lot of opportunity,” he added. The analyst is optimistic about Intel’s trajectory, crediting management for right-sizing the business, boosting the balance sheet, and establishing a strategic partnership with Nvidia. However, Pajjuri still wants to see Intel deliver meaningful progress in its gross margin expansion and foundry business, hence why he has a hold-equivalent rating on the stock. About 58% of analysts covering Intel also have hold ratings on the stock, compared with 34% of analysts who have buy ratings, according to FactSet. The Street is projecting a 12% year-over-year increase in Intel’s second quarter revenue to $14.42 billion, according to LSEG estimates. Earnings per share (EPS) are expected to be 21 cents, reversing a year-ago loss of 10 cents. Bottom line We remain bullish on Intel’s long-term prospects, with a buy-equivalent 1 rating on the stock. Since initiating a position at the beginning of June, we have added shares five more times. “Intel is my favorite chip stock,” Jim reiterated on Wednesday on CNBC. “What Lip-Bu Tan has done at Intel is nothing short of a miracle. During Thursday’s Morning Meeting for Club members, Jim highlighted the foundry business, which he thinks can “save American chips because [Tan] knows how to build a foundry.” He also praised Intel’s CPUs. “This is the number one CPU company in the world. Number one in the world. I like that.” (Jim Cramer’s Charitable Trust is long INTC, NVDA, AMZN, GOOGL, AAPL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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