Intel Corporation (INTC) shares closed Monday at $110.27, up $11.04 or 11.2%, following a report that Alphabet Inc.'s Google has placed an order for over 3 million tensor processing units (TPUs) for delivery in 2028. The news, reported by The Information and cited by Reuters, underscores Intel's push to become a major contract chipmaker as AI chip demand strains Taiwan Semiconductor Manufacturing Co.'s (TSM) capacity.
The surge came amid a broad rally in semiconductor stocks, with the Philadelphia SE Semiconductor Index gaining 5.6% and the Nasdaq Composite rising 0.86% to 25,929.66. Intel's pre-market trading had already indicated strong interest, with the stock trading at $110.27 before Tuesday's regular session.
Intel's Foundry Ambitions in Focus
The reported Google order is a significant test for Intel's turnaround strategy under CEO Lip-Bu Tan, who has emphasized the company's foundry business as a key growth driver. Intel has been investing heavily in its manufacturing capabilities, aiming to compete with TSMC, which is struggling to meet surging AI chip demand. Jacob Bourne, a technology analyst at eMarketer, said the report is "evidence that major AI customers want more than just a TSMC supply chain. They're racing to diversify."
D.A. Davidson's Gil Luria highlighted the geopolitical angle, noting that "supporting Intel supports U.S.-based manufacturing." The U.S. government has been pushing for domestic chip production through the CHIPS Act, making Intel's foundry expansion strategically important.
Recent Financial Performance
Intel's rally has been building since April, when the company reported better-than-expected first-quarter results. Revenue came in at $13.6 billion, up 7% year-over-year, and the company guided for second-quarter revenue between $13.8 billion and $14.8 billion. CEO Lip-Bu Tan credited internal changes for delivering the "sixth consecutive quarter of revenue above our expectations." CFO David Zinsner cited "unprecedented demand for silicon" and reaffirmed Intel's focus on increasing factory output.
However, Intel's foundry unit posted a $2.4 billion loss in the first quarter on revenue of $5.4 billion, highlighting the high costs of scaling up. The company is also exploring other opportunities, including a potential order from Nvidia (NVDA), which is reportedly evaluating Intel's technology for a processor that links four graphics chips. Reuters noted that Nvidia has not placed any orders yet.
Risks and Uncertainties
The Google order is unconfirmed, and Reuters reported that it was unable to independently verify the information. Alphabet and Nvidia did not respond to requests for comment, and Intel declined to comment. The order is reportedly years away from delivery, and scaling Intel's foundry business remains capital-intensive.
Investors are betting that AI demand can propel Intel back to the top of the chipmaking industry, but the premium from Monday's surge is at risk. The stock could lose ground if the Google order is delayed, if Nvidia steps back, or if TSMC maintains its dominance in advanced chip manufacturing.
Market participants will be watching for further developments as Intel navigates the challenges of its foundry strategy while capitalizing on the AI boom.
