Intel Upgraded to Buy With $125 Target Amid Server CPU Shortage
Key Facts
New Street Research raised its rating on Intel shares to "Buy" from "Neutral" and set a price target of $125 in a note issued Monday, October 26. The firm tied its recommendation to rising demand for server CPUs, driven by the expansion of agentic AI applications. This comes as Intel seeks to expand its server production capacity and address weaknesses in its manufacturing nodes. The stock closed at $90.47 that day, according to EL7 data. In the same session, the Nasdaq Composite rose 0.8% to 26,169.38, as U.S. stocks advanced.
A New Street analyst said, "Agentic AI is driving a sustained increase in demand for server CPUs, with supply constraints expected to persist for years." The estimate puts the supply shortage at the center of the firm's investment thesis, as it sees sustained demand potentially giving Intel room to increase sales while improving its manufacturing capability. New Street estimated that Intel's server capacity could grow by more than 50% in 2027. It attributed this to expanded Intel 3 production and increased 18A output, along with shifting some production capacity from PC processors to servers. These are analyst estimates, not realized results or company guidance.
New Street expects Intel's server CPU revenue to reach $50 billion by 2030, with a market share of between 20% and 25%. The firm puts the total addressable market at more than $220 billion that year, meaning its estimate assumes substantial market growth even as Intel's share of it declines. It also said increased internal demand for Intel chips supports utilization of its factories, strengthening the company's broader transformation. This part of the assessment links processor sales opportunities with demand benefiting Intel's manufacturing operations. The figures remain New Street forecasts, not confirmed financial results.
The server demand thesis comes amid a broader October rally in chip stocks, following a sharp decline the previous week. On October 19, Intel shares rose 4.2% after falling more than 14% the previous week, according to a Reuters report carried by MarketScreener. The report linked the stock's recovery at the time to a JPMorgan upgrade, prospects for agentic AI demand and chip shortages. The iShares Semiconductor ETF also rose 3.6% in premarket trading on October 19, after losing about 12% the previous week. These moves put New Street's upgrade in the context of sector volatility, but do not establish Intel's share performance during the October 27 session.
On a parallel, longer-term track, Intel announced a definitive agreement on October 26 to acquire Classiq, a specialist in quantum computing software. According to the company, the deal combines Classiq's algorithm synthesis platform with Intel's expertise in spin-qubit chip manufacturing and software, with the aim of developing an end-to-end quantum computing platform. Intel's CEO said Classiq's addition "turns Intel's quantum computing group into an integrated business." Classiq said its platform enables developers, researchers and companies to create scalable quantum applications without deep expertise in quantum circuit design. This bet differs from the focus of New Street's recommendation, which centered on the shortage of server CPUs and the potential to expand production capacity.
The upcoming quarterly results are a near-term milestone for tracking demand for Intel products and its production capacity. The company reported revenue of $16.1 billion in the second quarter of 2026, up 25% year over year. It is scheduled to report third-quarter results after the market closes on October 29, followed by an earnings call at 2 p.m. Pacific Time that day. The Classiq deal is also subject to regulatory approvals and customary closing conditions, and Intel expects to complete it in the first half of 2027. Until closing, the two companies will continue to operate independently.