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Intel shares surged 26 per cent to a record high on Friday after the US chipmaker’s results added to confidence that its ambitious turnaround plan was paying off.
In the latest evidence of its recovery, Intel forecast revenues of between $13.8bn and $14.8bn for the current quarter, smashing Wall Street expectations of $13bn, as the AI boom drives demand for its products.
Chief executive Lip-Bu Tan hailed a “fundamental” change at a company long regarded as America’s chipmaking champion but that was on the brink a year ago after losing market share to Asian rivals and a series of strategic mis-steps.
“A year ago the conversation about Intel was about whether we could survive,” Tan told analysts on Thursday after the group reported first-quarter results.
“Today it’s about how quickly we can add manufacturing capacity . . . to meet enormous demand . . . This is a fundamentally different company today,” said Tan, who took the top job last year after his predecessor Pat Gelsinger was ousted.
Intel reported first-quarter revenue of $13.6bn, up about 7 per cent from a year ago, and beating analysts’ estimates of $12.4bn.
Intel shares were at $83.26 in early trading, eclipsing a previous record high set in 2000, and extending a rally that began last August when it was announced that the US government would take a nearly 10 per cent stake in the chipmaker.
Those shares will be granted over time, alongside payments made by the Department of Commerce to the company under the US Chips Act. According to a filing last month, the US currently owns 8.6 per cent of Intel, a stake worth $35.4bn after Friday’s gains.
Since then Nvidia and SoftBank have also invested in Intel, which under Tan has announced plans to cut 15 per cent of its workforce and abandoned costly manufacturing projects in Germany and Poland as it seeks to compete with Taiwan’s TSMC.
Big Tech groups are pouring hundreds of billions of dollars into AI data centres, for which Intel supplies CPUs that work alongside the advanced processor chips designed by the likes of Nvidia and mainly manufactured by rival TSMC.
Its recent partnership with Elon Musk on his Terafab chipmaking facility and its decision to repurchase its equity stake in a chip factory in Ireland from Apollo have added to investor confidence in its manufacturing turnaround.
Intel has pumped billions of dollars into a lossmaking strategy to regain its position as a world-leading semiconductor manufacturer to rival TSMC, a risky bet that cost Gelsinger his job.
Under pressure from Donald Trump, Tan has continued a slimmed-down version of the chipmaking push.
Earlier this week, HSBC analysts upgraded their rating on Intel stock, saying the company appeared poised to benefit from a global rush to buy AI infrastructure that will benefit its server CPU business.
Data centre and AI products brought in $5.1bn in revenue in the first quarter, far surpassing expectations. Intel said the shift from AI model training to the “inference” computing needed to run the models meant more CPUs were needed for each GPU.
Tan said that for the past few years the story around AI computing was “almost exclusively” about GPUs and other “accelerator” chips, but that the CPU was now proving to be an “indispensable foundation of the AI era”.
Intel reported a net loss of $3.7bn, which it blamed on a $3.8bn writedown of goodwill related to its acquisition of Mobileye in 2017. On an adjusted basis, it reported net income of $1.5bn.
Chief financial officer David Zinsner cautioned that Intel, along with the rest of the chip industry, was still feeling the squeeze from a constrained supply of memory, wafers and other critical supplies.
Its chip manufacturing business reported revenue of $5.4bn, above the $4.6bn expected by analysts. However, this came mostly from Intel manufacturing its own products as it hopes to land external customers in the second half of this year.
Musk on Wednesday expressed confidence in Intel’s upcoming 14A manufacturing process for advanced chips, saying he planned to use it in his vast factory to supply SpaceX and Tesla. It would make him the first major customer for 14A.
Intel said it was hitting internal targets for the yield of its current 18A manufacturing process, the measure of its efficiency. It said 14A was showing a better yield than 18A at the equivalent stage in its development.