Intel shares surge 11% on AI foundry speculation and strong Q1 results
Reports of potential manufacturing deals with Google and Nvidia coincide with Intel’s sixth consecutive quarter of beating management expectations, though analysts maintain a cautious Hold rating.
Intel Corporation shares climbed more than 11% following market speculation that Alphabet’s Google intends to utilise Intel’s manufacturing services to produce over three million Tensor Processing Units (TPUs). Concurrently, Nvidia is reportedly assessing Intel’s foundry technology for its future AI processors. While these reports have fuelled optimism about Intel’s role in the expanding AI infrastructure buildout, the company confirmed that no formal agreements have been concluded with either tech giant at this time.
The market reaction coincided with Intel’s first-quarter 2026 earnings report, which demonstrated continued operational improvement. The company reported revenue of $13.6 billion, exceeding analyst expectations of $13.2 billion and representing 7% growth compared to the prior year. Non-GAAP earnings per share came in at $0.29, beating estimates of $0.27 and more than doubling the $0.13 posted in the same quarter last year. Gross margin increased to 41.0%, while non-GAAP operating margin climbed to 12.3%.
Intel has now surpassed management expectations for the sixth consecutive quarter, a streak supported by ongoing efficiency efforts. R&D and operating expenses decreased year-on-year as the company scales back costs. CEO Lip-Bu Tan highlighted that demand is shifting towards inference and agentic use cases, a trend that is driving increased demand for CPU chips and wafer fabrication. This strategic pivot aligns with the company’s broader goal of cementing its position as a manufacturer for major hyperscale clients.
Despite the recent rally, valuation metrics remain a point of contention for investors. Intel currently trades at approximately 10.6 times sales and 176.6 times forward P/E, multiples that appear expensive compared to historical levels and typical semiconductor peers. The stock has recovered significantly from its 52-week low of $18.97, trading near $106 per share, up about 482% over the past year. However, this price remains roughly 17% off its recent peak of $132.75.
Wall Street maintains a “Hold” consensus rating for Intel, with a mean price target of $90.58. Analysts cite execution risks and the substantial capital required for foundry infrastructure as reasons for their caution. For the second quarter of 2026, Intel expects revenue between $13.8 billion and $14.8 billion, with GAAP EPS of $0.20, implying stable performance as the company continues to invest in scaling manufacturing capacity.
