From an AI Supporting Player to the Center of U.S. Chip Manufacturing: Intel's Q2 Earnings Highlight CPU Revival and Foundry Momentum

After Intel's share price retreated significantly from its all-time highs reached in June, the stock's risk-reward profile has become considerably more attractive than it was just a few months ago. Supported by robust demand for data center CPUs, continued expansion of its foundry customer relationships, and persistent AI infrastructure spending, Wall Street has grown increasingly optimistic about Intel's earnings outlook and long-term fundamentals.

Most analysts expect Intel's second-quarter earnings, scheduled for release after the U.S. market closes on July 23 (ET), to exceed the company's own guidance. Many also believe management will deliver a stronger-than-expected outlook for future growth.

More importantly, Intel's investment thesis is undergoing a fundamental transformation. The market is no longer valuing the company solely as a traditional consumer CPU manufacturer. Instead, investors are increasingly viewing Intel as a comprehensive AI infrastructure platform spanning data center server CPUs, advanced semiconductor manufacturing, foundry services, and advanced packaging technologies. This shift in perception helps explain why HSBC recently doubled its price target on Intel to US$200. Intel has once again become one of the most closely watched semiconductor stocks among both institutional and retail investors worldwide.

As AI agents rapidly gain adoption across industries, cloud computing giants and leading AI developers such as Anthropic continue to accelerate spending on artificial intelligence infrastructure, while AI data center construction expands globally. Against this backdrop, HSBC's aggressive bullish stance reflects a broader consensus shared by other major Wall Street firms, including Citigroup and Bank of America, which also see significant upside potential for Intel.

Although NVIDIA continues to dominate the AI GPU market, data center CPUs, advanced packaging technologies, and semiconductor manufacturing capacity are becoming increasingly critical components of the AI computing supply chain. HSBC believes Intel is well positioned to benefit from surging demand for data center CPUs driven by AI agents, as well as the ongoing global expansion of AI semiconductor manufacturing capacity, including large-scale initiatives such as Elon Musk's Terafab superchip factory.

Intel has guided for second-quarter revenue of US$13.8 billion to US$14.8 billion, with a midpoint of US$14.3 billion. The company also expects a non-GAAP gross margin of approximately 39% and non-GAAP earnings per share of US$0.20. In the first quarter, Intel reported US$13.6 billion in revenue, representing 7% year-over-year growth, while non-GAAP EPS reached US$0.29. The company has now exceeded its own revenue guidance for six consecutive quarters, providing a solid foundation for Wall Street's optimistic expectations heading into the second-quarter earnings release.

Market Insight:

At its core, Intel's investment thesis revolves around the recovery of earnings relative to valuation. If future profit growth significantly outpaces share price appreciation, the company's price-to-earnings (P/E) ratio can decline rapidly even as the stock continues to perform well. Conversely, if earnings growth fails to materialize on schedule, an elevated valuation could amplify the market's reaction to any operational missteps.

At present, Intel's most compelling catalyst is not its external foundry business, but rather the structural resurgence in demand for data center CPUs, which is emerging as the company's clearest and most sustainable growth driver.