Why is Intel Corporation (INTC) up over 33%? Is the Rally Sustainable?

Intel Corporation (NASDAQ: INTC ) is benefiting from renewed investor optimism surrounding its CPU business as surging artificial intelligence demand drives greater demand for computing infrastructure. The stock has gained more than 33% over the past month as investors increasingly recognize CPUs as a critical component of AI data centers.

We recently examined why the SK Hynix partnership is important for Intel and what it means. Read Here: SK Hynix Is Eyeing Intel's (INTC) Ohio Site. Why Micron (MU) Should Pay Attention .

The rise of AI agents has further reinforced the importance of CPUs, which were initially viewed as potential losers as graphics processing units became the dominant hardware for AI workloads. Increasingly, CPUs and GPUs are working alongside each other, with CPUs handling orchestration, general-purpose computing, and certain inference-related workloads.

This trend is supporting sustained demand for Intel's Xeon server processors. Customers are increasingly deploying CPUs alongside accelerators, resulting in higher CPU-to-accelerator ratios across AI infrastructure.

Intel highlighted this momentum in its second-quarter results, pointing to unprecedented compute demand as a driver of sustainable growth across its CPU business. Revenue in the company's data center and AI-related segment increased 59% year over year to $6.3 billion. Intel also expects double-digit industry unit growth as server CPU demand continues to improve.

CEO Lip-Bu Tan has emphasized the strength of demand, noting that Intel is currently unable to fulfill all customer requests for its processors. Supply constraints have limited the company's ability to fully capitalize on the surge in demand, with Intel reportedly meeting only about half of customer requests.

Intel's Foundry Ambitions Add Another Growth Opportunity

Beyond its CPU business, it's attempting to reestablish itself as a major force in semiconductor manufacturing. The company is expanding its third-party foundry business to compete with leading contract chip manufacturers.

Google has selected Intel to manufacture its Tensor Processing Units, while SK Hynix has reportedly been in discussions with Intel regarding memory-chip production.

If Intel Corporation (NASDAQ:INTC) can successfully scale its foundry operations, the business could provide an additional avenue for growth while allowing the company to participate in the broader expansion of AI semiconductor infrastructure.

Despite the strong opportunity created by rising CPU demand, Intel still faces significant competitive pressure. Advanced Micro Devices continues to gain share in the server CPU market, potentially limiting how much of the industry's growth Intel can capture.