Equity Research
Rating: BUY | 12-M Price Target: $115 | Upside: +28% | Current Price: $90
Rating and Price Target
We maintain our Buy rating and $115 price target for Intel shares over the next 12 months, roughly 28% above its current price of $90.07. Here's the abbreviated version of our thinking: Intel is midway through a long and costly turnaround that is finally starting to produce tangible results. Its most advanced chip-manufacturing process, known as 18A, is producing chips and those chips are shipping into real products. Revenue from Intel's vaunted data center business (which sells chips to power servers and artificial intelligence) surged 59% year-over-year. And yet Intel's reported earnings continue to look dreadful due to one-time accounting charges that don't impact the company's actual performance. Oh yeah, did we mention that both the U.S. government and Nvidia have each taken large positions in Intel over the past year? Nice financial cushion. Well-heeled investors believe in this story. This is not your typical easy win, stay-the-course pick. Think turnaround play with plenty of upside.
Our view: While we believe multiple shares can move higher from here, we think Intel is priced for maximum pessimism. As such, even incremental positive developments could send the stock higher. We have more conviction in "Intel stabilizes and survives" versus "Intel becomes a true competitor to TSMC for chip manufacturing." The latter will take time and hinge on capturing new found customers.
Company Overview and Business Segments
Intel has five major sources of revenue:
Client Computing Group (CCG): Intel’s CCG business sells chips that go into laptops and desktop computers. Revenue was $8.88 billion in Q2 2026, up 13% year-over-year, driven by new PC launches, including so-called “AI PCs” laptops featuring Intel’s latest 18A chips.
Data Center and AI (DCAI): Intel sells server chips (known as Xeon) and AI chips (known as Gaudi) in its DCAI segment. Currently the fastest-growing segment of the business. Revenue reached $6.26 billion in Q2 2026, up 59% year-over-year as companies snap up servers to run AI workloads.
Network and Edge (NEX): Intel’s NEX segment sells chips that go into networking equipment and telecom devices. This is a smaller, less volatile part of the business.
Intel Foundry: Intel Foundry is Intel’s semiconductor-manufacturing business. It makes chips for Intel, and for other companies who pay Intel to do the manufacturing (known as a “foundry”). Revenue was $5.77 billion in Q2 20 26, up 31% year-over-year. But it still lost about $2.09 billion in that quarter. The losses are declining quarter-over-quarter, which is good.
Mobileye: Mobileye is a public company that Intel majority owns (~85%). Mobileye makes technology for self-driving cars and driver-assistance systems. Revenue was roughly flat at $508 million in Q2 20 26. It recently began testing self-driving taxi services.
Intel’s real advantage, though hidden from view in those revenue segments, is its manufacturing technology. The newest node, known as 18A, is already in production making real products: a laptop chip known as Panther Lake and a server chip known as Clearwater Forest. Whereas Intel will only approve its next process, 14A, if it first secures a large customer from the outside. That is company policy right now. Intel also has advanced chip packaging technologies known as Foveros and EMIB. These technologies allow Intel to fuse together chips of different types in ways that its competitors cannot easily match.
Our View: We think the successful launch of 18A is the single biggest positive catalyst for Intel’s story. The chips Intel is putting on 18A right now aren’t top-of-the-line compared to rivals TSMC and Samsung. But if Intel can launch 18A successfully, it proves that Intel can still make cutting-edge chips. This is important, because Intel has been falling behind for years. Shipped products prove this to be true. We are agnostic on whether Intel can actually compete on manufacturing costs with TSMC on 18A. That information is not public yet.
Recent Financial Performance
Intel reported revenue of $16.1 billion for the three months ending in June 2022, up 25% from the same year ago quarter. This was the best year-over-year growth Intel has seen since 2011. However, for Q2, Intel reported a net loss of $11 billion. While this sounds scary, basically all of it can be attributed to an non-cash accounting charge related to shares that the government owns as part of the CHIPS Act investment. As Intel's stock price increases, this accounting rule requires Intel to take a paper loss. No actual money changes hands, but for accounting purposes, it pushes Intel's net income into negative territory. Remove that accounting charge and Intel earned $0.42 per share, adjusted. Analysts were expecting a smaller earnings per share number, so this was a surprise. Operating income ex-items was $1.8 billion, up from a $3.2 billion loss in Q2 2021.
Analysts are expecting Intel's revenue to come in at about $62.7 billion for all of 2022 and $72.0 billion in 2023. EPS should improve as well, from about $1.50 today to $2.07 next year. Again, these estimates could change if the accounting charges vary significantly.
Our View: Most investors are selling the stock based on the scary headline number. The reality is that the underlying business - particularly Intel's data center business and the foundry unit's losses shrinking - are improving at a quicker rate than investors can see through the headline numbers. This is one of the more confident calls we can make because we are basing this directly on what the company had to say about its own numbers. However, Intel will have to continue to execute quarter after quarter for this re-rating to happen.
Growth Drivers and Strategic Bets
CPU manufacturing node advancements. Intel's 18A process is here, and products are shipping. Microsoft, Amazon Web Services, and Fortinet have committed to purchase chips from Intel's foundry business. Advanced process node 14A will not advance without a significant new customer committing to the node first, so this is THE biggest thing to keep an eye on.
Erosion of server market share to AMD. It's an honest mixed bag. Intel dominates server chip unit sales volume, but AMD posted a record 46.2% server chip revenue share in early 2026. In other words, AMD is winning more of the biggest-ticket, highest-margin deals even if it has not yet surpassed Intel for total server chip volume.
AI chips competing with Nvidia. Intel dialed back its ambitions to go head-to-head with Nvidia's highest-end AI chips. It will still make a competitor, but it's now focusing on a less expensive chip called Crescent Island designed for less expensive AI workloads, not the most intensive ones. Separately, Nvidia paid Intel $5 billion to join forces and co-develop new products. This deal isn't so much about Intel trying to compete with Nvidia in AI chips. Think of it more as a way for Intel to ensure its chips stay relevant inside Nvidia powered data centers.
US Government support. In 2025, the U.S. government converted billions of dollars of grants owed to Intel into an outright 9.9% ownership stake in the company. This amounts to a massive vote of confidence from the government AND gives Intel a financial war chest. The price paid for this stake was much less than where the stock trades today.
Self-driving cars. Mobileye has two avenues for self-driving taxis. The first is through a partnership with VW's MOIA robotaxi service, which is targeting launching its service in Orlando by late 2026. The second is through its own Mobileye branded ride hailing service, which wouldn't launch until around 2027. Keep in mind that revenues from self-driving taxis are still a drop in the bucket to Intel's larger businesses.
Lumo View: It's encouraging to see Intel actually has paying customers (Microsoft, AWS, Fortinet) for its fab services. That had been the biggest question mark for years. Watching AMD take an increasing cut of high-value server deals is the thing we're watching most closely. If that trend continues we could see Intel's server share fall faster than we currently expect. The Nvidia deal is largely a vote of confidence in our opinion.
Capital Allocation and Balance Sheet
Intel has received over $19 to $20 billion in the past 18 months from outside investors, primarily the U. S. government and Nvidia, but also includes previous funding from SoftBank. The outside funding is no small part due to the fact that Intel is burning through cash on constructing new factories as well.
Intel ended Q2 20 26 with $12.9 billion in cash and $16.9 billion in short-term investments. Total shareholder equity dropped to $103.1 billion at the end of Q2 20 26, down from $126.4 billion at the end of 20 25. This decline was mostly due to the above mentioned accounting losses. Intel produced $7.0 billion in operating cash flow during Q2 20 26, which is actually a very solid number. However, Intel is also spending more than $2.5 billion per quarter on new equipment and factories. Management now expects full-year capital expenditures on factories and equipment to be above $20 billion for 20 26 and higher still for 20 27. Intel’s own CFO has commented that the company may need to raise additional capital from investors to cover some or all of this spending.
Intel suspended its dividend in late 20 24 as part of a larger cost-cutting effort that also saw the company cut 15% of its employees. The dividend still has not resumed, and we do not expect it to do so in the next year considering how much cash Intel needs to spend on its new factories.
Our view: We view the recent series of investments from the government and Nvidia as a positive vote of confidence that reduces the chance of Intel running out of cash. However, we are concerned about the potential need for Intel to issue additional stock to raise cash, which would dilute the value of existing shares. That is our primary balance sheet concern.
Competitive Benchmarking
Consider that TSMC still dwarfs every firm on this list. While GlobalFoundries is about the right size of what Intel's foundry business will eventually try to resemble, its profit margins are far thinner than TSMC's. Just how much Intel Foundry has to evolve to simply reach smaller rival GF lets alone the titan TSMC.
Our view: We believe Intel's foundry business is currently being given very little credit by the stock market as part of Intel's overall valuation. So if Intel were to land one big, name brand customer for its next process node, we'd expect to see a larger move higher in the stock just based on a change of perception.
Strengths and Risks
Intel's long-term advantages are its x86 chip design that almost all business (and many personal) computers are built upon, along with being one of only a few companies capable of designing and manufacturing the most advanced chips in the U.S. (something that matters a lot with current government policy). Mobileye also has one of the largest safety and driving-data track records in the autonomous driving space.
The Risks
Below are the risks we see facing Intel, in order of how highly we rate them:
Intel's next chip process node could slip again if it doesn't secure a large customer.
Intel continues to cede market share to rival AMD in the profitable server chip market. Intel Foundry's external customer revenue ($293 million last quarter) is small relative to its $2 billion-plus quarterly operating loss.
Intel may have to raise additional capital if spending on new fabs forces it to burn through cash at an accelerated rate. If so, that could dilute current shareholders.
Intel benefits from government policy that may change if there's a change in political leadership.
Our view: We believe Intel's x86 design maintainership provides a decent floor for the share price, as does the confidence and backing of multiple government organizations. However, neither of these stop AMD from continuing to eat into Intel's server market share in the near term, which we view as the most likely risk to materialize within the next year.
Valuation
It's really tough to value Intel (INTC) through traditional lenses these days given how much one-time accounting charges are hurting reported earnings. Look at it another way though & if you consider Intel's pure-play chip-selling business separately from its money-losing foundry business, Intel's core chip business (about the size of Qualcomm QCOM ) would probably deserve a fairly healthy valuation all by itself given its steadily improving margins. The foundry business is basically worth nothing in the stock price today because it loses money, but it does have tremendous potential if it pans out. Throw in the value of Intel's majority stake in publicly traded Mobileye (MBLY) & we think the sum of all these parts comes out to a higher number than where the stock trades today (hence our $115 price target).
Our view: We like this argument fairly comfortably, but it does hinge on Intel's foundry business landing a large customer within the next 1-2 years. If that doesn't happen, we would view the stock as much closer to fairly valued than cheap.
Bull, Base, and Bear Scenarios
What the Market Is Saying
Most Analysts have rated Intel a "Hold" recently. The average Wall Street Intel price target is about $110. However, several large banks have increased their price targets by double digits in recent months as Intel's story has turned positive. The top shareholders are mostly big index fund providers. This is typical for such a large company. One notable thing though: Intel CEO Lip- Bu Tan purchased $10 million of Intel stock himself on August 20,26.
Our view: We see this Intel CEO stock purchase as well as the government and Nvidia holding shares they bought much lower as lowering the probability of a sudden negative development. However, with a majority of the company owned by index funds rather than active investors, moves can sometimes be larger based on the overall market rather than company specific news.
Conclusion
We maintain our Buy rating on Intel (NASDAQ: INTC), raising our price target to $115 from $105, or approximately 28% above current levels. This is an investment for those who see a turnaround story with significant upside, not for those seeking a quiet place to park their money. The stock is appropriate for investors that can tolerate significant risk and volatility, and will hold the stock for one to two years or longer. Near-term reported earnings will continue to be affected by accounting charges and heavy spending on factories. The range of potential outcomes is very wide, so we view this as a smaller position in a portfolio rather than a core holding until Intel secures another giant manufacturing client.
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