Why Wells Fargo Thinks Intel’s AI Business Is Getting Even Stronger

Not every big tech company has been a winner in the artificial intelligence build-out. And others have just been slower getting to the party. Intel (INTC), for instance, dropped 60% in 2024, while Nvidia (NVDA) jumped 171%.

But ever since then, Intel has been catching up. INTC stock was up 84% in 2025, beating Nvidia’s 38% gain. And this year, Intel is up an impressive 148%, while Nvidia is barely treading water.

There’s a lot to like about Intel, which is benefiting from some investments from the U.S. government, increased need for its server central processing units (CPUs) and custom AI chips to help run agentic AI applications, and solid financial results. 

Now Wells Fargo is pointing out another tailwind—rising server prices and high data center gross margins. Analyst Aaron Rakers says Intel’s most recent 10-Q shows the company shipped 9% more Xeon server processors than a year ago, but the average selling price increased a whopping 48% from a year ago.

Rakers also pointed out the company’s data center and AI business, which posted a gross margin of 56%, which was 8.4 percentage points better than the previous quarter, and revenue from Intel’s custom AI chip business tripled from a year ago while generating $1.84 billion in operating income.

Intel is one of the best-performing stocks in the market this year. Will the stock continue its momentum?

About Intel Stock

Intel, which is based in Santa Clara, California, is a major semiconductor company and a provider of microprocessors and chipsets. It’s also trying to develop a foundry business that would put it in competition with Taiwan Semiconductor Manufacturing (TSM) and just secured its first named major commercial customer, Fortinet (FTNT).

The large run-up in INTC stock has pushed the company’s market capitalization to $435 billion. Shares currently trade at a forward price-to-earnings ratio of 55, which is down from 85 just a month ago. However, investors should recognize that Intel's stock is extremely expensive compared to its historical norms; the five-year mean P/E for INTC is just 11.1.

One item of note: the U.S. government took a 9.9% equity stake in Intel in August 2025, buying 433.3 million shares at $20.47 per share. INTC stock has risen 237% since that deal, and the government’s $8.9 billion investment is now worth more than $36.2 billion.

Intel Beats on Earnings

One reason why Intel's stock has been rising so quickly is the company’s earnings report success. Intel beat analysts’ expectations by at least 200% in each of the last four quarters; in the second quarter, revenue of $16.1 billion was up 25% from a year ago, and adjusted earnings of $0.42 per share topped analysts’ estimates of $0.21 per share.

Intel attributed its strong earnings to the AI infrastructure buildout, noting that its revenue growth was its fastest in 15 years.

“AI is driving unprecedented demand for compute,” CEO Lip-Bu Tan said. “As we continue to execute, Intel is well-positioned to capture sustainable growth across our CPU franchise.”

Intel announced it is negotiating with customers for long-term agreements for its server CPUs. CFO David Zinsner said the company had 10 such agreements, but data center customers are demanding more than Intel can currently produce. “Customers continue to signal a strong and sustainable spending environment,” he said.

Management issued guidance for adjusted earnings per share of $0.38 and revenue between $15.8 billion and $16.8 billion.

What Do Analysts Expect for INTC Stock?

While Intel has had a great year, there’s also some trepidation for the stock. Share prices have shrunk 34% in the last month as AI stocks are seeing an across-the-board pullback. Thirty-one of 45 analysts who cover INTC stock suggest holding, with 12 posting “Buy” ratings and two posting “Sell” ratings.

The consensus price target of $113 suggests a potential upside of 36%. But there is hardly a consensus, as three analyst ratings posted July 28 signify—Bank of America posted a $160 price target and a “Buy” rating; Stifel Nicolaus posted a $110 price target and a “Hold” rating, and J.P. Morgan posted an $85 price target and a “Sell” rating.

As long as Intel continues to see demand for its AI products, the company will have solid revenue numbers, and if it can secure more foundry customers, it will only help the bottom line. But the company is getting caught up now in the market selloff of AI stocks, so it may continue to have short-term challenges.