Intel Shares Eclipse Dot-Com Peak on AI-Fueled Sales Forecast

Lip-Bu Tan Photo by Annabelle Chih /Photographer: Annabelle Chih/Blo

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(Bloomberg) — Intel Corp. shares jumped to their highest level since 2000 after the chipmaker delivered a blockbuster sales forecast that shattered Wall Street expectations. 

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Revenue will be $13.8 billion to $14.8 billion in the June quarter, the company said Thursday in a statement. Analysts estimated $13 billion on average, according to data compiled by Bloomberg. 

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Intel shares soared as much as 27% in premarket trading on Friday, putting the stock on track to hit its highest level in almost 26 years. It had gained 81% this year heading into the report, closing at $66.78.

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The upbeat outlook suggests that Chief Executive Officer Lip-Bu Tan is making progress on a comeback plan that aims to position the chipmaker to benefit from the build out of artificial intelligence computing. After lining up major investments in Intel last year — helping to strengthen the company’s balance sheet — he’s now delivering on a promise to improve operations. 

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“Everyone is starting to direct orders to Intel, and I think we are in the early days,” Great Hill Capital Chairman Thomas Hayes, an Intel investor, said on Bloomberg Television. “This has gone from despondency to euphoria in a very short period of time.”

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The US government has made a significant gain after announcing an investment in August, according to Bloomberg calculations. After agreeing to buy in at $20.47 for a total of about $8.9 billion, the US holding is worth more than $36.9 billion on paper. Technically, taxpayers own only about 274.6 million shares and the rest remain in an escrow account awaiting additional funds from a program through which the government gets secure chip production for military needs. However, all of the shares are accounted for on Intel’s balance sheet, per Securities & Exchange Commission rules.

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Meeting Demand

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The earnings report shows that the need for data center chips to power the massive AI expansion is lifting demand for Intel’s flagship Xeon server processors. That type of generalist semiconductor — the central processing unit, or CPU — is a renewed focus for companies trying to turn their AI software into services that bring in revenue.

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In an interview, Tan said Intel delivered a “solid result” that was ahead of its projections. He expects the strong demand for processors used in AI systems to expand and said the company is “laser-focused” on increasing output from Intel’s factories, which still can’t produce enough to fill all its orders. 

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“There is huge demand,” Tan said. “We are working very hard with our team to make sure we deliver, that we meet that demand but we are still short because the demand keeps increasing from the customers.”

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For now, Intel has also been able to navigate another challenge the PC industry is facing: memory-chip shortages. 

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Red-hot demand for server products has lured memory suppliers into concentrating on the high-speed processors for those machines. That’s cut into production of standard products used in phones and personal computers, meaning fewer of those mass-market devices are being built and the prices are going up.