When Intel releases earnings after the closing bell on Thursday, investors will focus on two key updates: stronger growth in its AI server CPUs and further progress in its foundry business. This report comes at a critical time for optimistic investors like us. After a ferocious rally from spring through late June, the stock has tumbled, dropping more than 27% from its June 22 all-time high close of nearly $141 per share. The decline has less to do with a collapse in Intel’s fundamentals and more to do with a sharp decline in the semiconductor sector as investors reassess whether Intel’s hyperscalar customers can continue to invest aggressively in artificial intelligence development. Intel was one of the best-performing stocks in the group, up 280% since its peak in June, but was vulnerable to some profit-taking. So what can Intel do to reverse this trend? First, investors are looking for evidence that demand for the company’s central processing units (CPUs) remains high and that Intel can meet it. The CPU is often referred to as the brain of the computer, managing the instructions and tasks that keep the system running. This makes AI a valuable commodity in artificial intelligence as well, as AI computing moves from model training to inference, where AI models perform tasks in response to user requests. In particular, much of the CPU demand is currently increasing due to the rise of more sophisticated AI systems that can autonomously complete multi-step tasks. This shift has focused attention on Intel’s chips, which were once reserved for so-called AI accelerators, particularly Nvidia’s graphics processing units (GPUs) and Google’s in-house tensor processing units (TPUs). However, that opportunity created some constraints on supply. First-quarter sales were $13.6 billion, $1.4 billion above the midpoint of the company’s guidance. But Intel CFO David Zinser said on an April post-earnings conference call that sales would have been “pretty high” if demand hadn’t outpaced available supply. We hope to see if Intel was able to increase supply on Thursday evening. It will tap into Intel’s nascent foundry business to meet demand for its own processors and capture a new revenue stream by manufacturing chips designed by other companies. This dual role distinguishes Intel from rival data center CPU designers, especially large technology companies with custom silicon such as Advanced Micro Devices and Nvidia, as well as Amazon and Alphabet’s Google. All of these companies rely on a third-party manufacturer, Taiwan Semiconductor Corporation (TSMC), to realize their chip designs. Intel is unique among advanced chip designers because it still operates its own factories, known in the chip industry as foundries. “Right now, Intel has the biggest opportunity in front of it to expand its clean room space,” said Ben Bajarin, CEO and principal analyst at technology research firm Creative Strategies. Bajarin expects Intel to increase capital spending on its factories, some of which will go toward expanding clean rooms, the ultra-controlled environments in which advanced chips are manufactured. The goal is to become a reliable alternative source of chips for companies that have traditionally relied on industry powerhouse TSMC. “They were able to add foundry capacity faster than[TSMC]could, primarily here in the U.S., and some in Ireland,” Bajarin added. The Taiwan-based chipmaker is at capacity and dependent customers need other options. So Inter were given a natural shot-in. Intel has recently taken steps to expand capacity. Last week, the company announced plans to invest approximately $5.7 billion in its Leixlip facility in Ireland to expand production of Xeon-branded server CPUs and other products. The investment is primarily aimed at meeting demand for Intel’s own chips, but will also expand the company’s manufacturing footprint and support the foundry’s long-term ambitions. On Tuesday, Intel’s foundry division signed a deal with cybersecurity company Fortinet to produce next-generation security chips. This is the first announcement of this kind for the division, led by Intel CEO Lip Vu Tan, who joined Intel in March 2025. Other recent achievements in the foundry sector include both manufacturing and packaging opportunities for companies such as Apple, MediaTek and Elon Musk’s TerraFab project. Although the companies have not confirmed the Apple-Intel partnership, President Donald Trump has said the two US tech giants have reached an agreement. The US government became Intel’s largest shareholder last year. INTC YTD Mountain Intel YTD RBC Capital analyst Srini Pajuri said supply constraints are working in Intel’s favor in other ways as well. With demand outstripping supply, Pajjuri believes the company can improve its product mix by prioritizing higher-value server CPUs, while also increasing pricing power by giving customers fewer choices. This idea of pricing power is one of the key ways to “manage” constraints and still meet Wall Street’s high standards. Adding a little more supply to reduce (but not eliminate) the demand imbalance while simultaneously raising prices is one way to generate upside returns for Wall Street expectations. There are questions about whether Intel’s yield rate, or the percentage of working chips in a batch that can be sold, can improve enough to match Taiwan Semiconductor’s output. Pajuri said being on par with the Taiwan cicada is not important. “Intel doesn’t need to be on par with TSMC to advance,” Pajjuri argued. “As long as they get close to TSMC’s position, I think they have a lot of opportunity,” he added. The analyst is optimistic about Intel’s future trajectory, crediting management for right-sizing the business, expanding its balance sheet, and establishing a strategic partnership with Nvidia. But Pajuri still wants Intel to grow its gross margins and make meaningful progress in its foundry business, which is why he rates the stock as Hold. About 58% of analysts covering Intel rate the stock a hold, compared with 34% who rate it a buy, according to FactSet. According to LSEG estimates, The Street expects Intel’s second-quarter revenue to rise 12% year over year to $14.42 billion. Earnings per share (EPS) are expected to be 21 cents, reversing a loss of 10 cents a year ago. Conclusion We remain bullish on Intel’s long-term prospects, giving the stock a rating of ‘1’, equivalent to ‘buy’. Since initiating the position in early June, I have added shares five more times. “Intel is my favorite chip stock,” Jim reiterated on CNBC Wednesday. “What Lip Vu Tan has accomplished at Intel is nothing short of miraculous. At Thursday’s morning meeting for club members, Jim highlighted the foundry business, saying he thinks “(Tan) can save American chips because he knows how to build foundries,” and praised Intel’s CPUs. “This is the world’s number one CPU company.” World number one. I like it. (Jim Cramer Charitable Trusts are long INTC, NVDA, AMZN, GOOGL, AAPL. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in a charitable trust’s portfolio. 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