As the AI trade broadens out, Intel's stock was leading the S&P 500's gainers

Intel's stock hasn't exactly been a poster child for the artificial-intelligence trade, but Wednesday's stock action suggests that might be changing.

Shares of Intel were up 6% in Wednesday trading, to lead the S&P 500's gainers.

It didn't always seem like Intel's product offerings were lined up with the hottest areas of AI. The company makes central processing units for personal computers and servers, but the more obvious part of the AI trade has focused on graphics processing units made by Nvidia and Advanced Micro Devices, as well as custom chips co-designed by Broadcom and Marvell Technology. Intel's own attempts to get into the business of AI accelerators haven't garnered much traction.

But some investors seem to be thinking that CPUs will start becoming a hotter commodity as AI systems become more powerful and more in demand. Wall Street has come to worry about a shortage of memory components, which has driven up prices for memory offerings - and for their stocks. Mizuho trading-desk analyst Jordan Klein told MarketWatch that there has been online chatter suggesting significant server CPU price hikes could be on the horizon.

FundaAI, an AI company that publishes investment research on Substack, put out a report about the CPU market on Wednesday. "While the market's current attention is fixated on shortages in GPGPUs and AI ASICs, an equally severe crisis is brewing in the CPU sector," FundaAI said on X.

To Klein, however, that talk is just "noise." He met with Intel's investor-relations team yesterday and said that the discussion of tight conditions centered on next-generation PC chips, not server ones. "They never even mentioned massive price hikes or even any for server products," Klein said in emailed comments.

Jim Johnson, the senior vice president for Intel's client-computing group, discussed the memory crunch in a Wednesday interview on Bloomberg TV. "Our customers are struggling on what they're going to do with it, and they haven't decided yet. But what they're asking us to do is keep our build plan solid, because in 2026, they see a chance to really gain share on the back of Series 3," a type of Intel processor.

Intel declined to comment on Wednesday's stock movement.

John Pitzer, Intel's corporate vice president of international relations, said at a Barclays conference last month that executives were "still trying to get our arms fully around what's driving" strong trends in the server CPU business - which one analyst noted seemed to go against earlier thinking that the GPU boom would reduce the amount of budget available for CPU purchases.

One possible driver, Pitzer said, is that "power-constrained" customers have realized that "one of the easiest ways to improve your power budget is to take a five-year-old chip that's sitting in your installed base and replacing it with a brand-new chip, because those brand-new chips are about 80% more power-efficient," according to an AlphaSense transcript.

Nvidia makes its own CPUs, currently called Grace, which it sells as part of its Grace Blackwell systems, and the company talked up its forthcoming Vera CPU at the CES trade show this week. Nvidia CEO Jensen Huang also seemed to take a shot at the value of Intel's offerings, telling analysts that you're not going to "put your favorite x86" - a reference to CPU architecture used by AMD and Intel - into one of its new racks because "it's either not fast enough or it's going to draw too much power."

D.A. Davidson analyst Gil Luria told MarketWatch that Intel's stock move could be further indication that investors are looking to broaden beyond well-trodden AI plays like Nvidia by "rushing into more marginal players like [Intel] and memory stocks, with the belief that the great data-center buildout will drive growth in those shares as well."

Meanwhile, Intel introduced its Core Ultra Series 3 processors at CES this week - the first to be designed on its new 18A process. The company said 18A is "the most advanced semiconductor process ever developed and manufactured in the United States." The Series 3 platform will be used in more than 200 AI PC designs around the world, according to Intel.

While that announcement came two days ago, and it's not clear why it would be fueling particular enthusiasm on Wednesday, Gabelli Funds research analyst Ryuta Makino pointed to a more recent development from Qualcomm, which reportedly confirmed that it's looking into working with Samsung's foundry.

That suggests Qualcomm could also look to Intel for chip-manufacturing work, and in Makino's view, the main catalyst for Intel's shares this year will be on the foundry side.

"If they can announce a major customer in the second half of 2026 or first half of 2027 for Intel 18A or Intel 14A, then that would be the biggest catalyst for Intel shares this year," he said.

"I think we're going to see a lot of momentum on 14A," Intel CEO Lip-Bu Tan said in a video posted to X on Wednesday.