Intel's Big Bet on AI and Data Centers: Can It Turn the Tide?

Intel is making a strong comeback, and investors are taking notice. The company's focus on AI and data centers is driving demand for its traditional server chips. This shift has sparked optimism among shareholders, who haven't felt this positive in a long time. Last year, Intel secured significant investments, including $5 billion from Nvidia and $2 billion from SoftBank. These funds, along with U. S. government support, have bolstered Intel's financial position. CEO Lip-Bu Tan has been busy reshaping the company's manufacturing and AI strategies, trimming a bloated management structure, and overhauling chipmaking operations. Analysts are bullish about Intel's future. Ryuta Makino from Gabelli Funds believes the company is set up for success in the near term. He predicts a double-digit price hike for server CPUs in 2026. At least 10 brokerages have raised their price targets or ratings for Intel, indicating high expectations.Intel's data center business is expected to see a more than 30% jump, reaching $4. 43 billion for the quarter ended December. This growth is driven by big tech companies building advanced data centers that rely on Intel's server chips and CPUs, along with graphics processors from companies like Nvidia. However, Intel faces challenges in the PC market. It has been losing share to rivals AMD and Arm, and weaker PC demand due to a global memory chip shortage could further impact its performance. UBS analysts warn that increasing memory prices could moderate PC demand, as memory accounts for 25% to 30% of PC bill of materials. They expect a 4% drop in global 2026 PC shipments. Despite these hurdles, Intel's refreshed product lineup, including its new "Panther Lake" PC chips, could help plug some losses. These chips are the first products made using Intel's advanced 18A manufacturing technology. While Intel has long been its own largest manufacturing customer, there is hope that new foundry clients will emerge, given the company's growing political goodwill.