Intel Corporation (INTC) saw its stock decline nearly 1% to $84.12 on Tuesday, paring earlier losses after touching an intraday low of $80.39. The pullback halted a rally that had propelled shares to their highest level in 26 years, fueled by surging demand for the company's central processing units (CPUs) in artificial intelligence (AI) inference workloads. Trading volume exceeded 109 million shares, well above the daily average.
The broader semiconductor sector also came under pressure. The Philadelphia SE Semiconductor Index, a benchmark for chip stocks, slid 3.2% after the Wall Street Journal reported that OpenAI, the creator of ChatGPT, fell short of its user and revenue targets. The news raised doubts about the startup's ability to fund its ambitious computing agreements, casting a shadow over AI-related names. Advanced Micro Devices (AMD), Broadcom (AVGO), and Nvidia (NVDA) all traded lower.
Intel's AI-Fueled Rally Faces Headwinds
Intel's recent surge has been driven by its growing role as a bellwether for a new wave in AI trading: CPUs powering data center inference, the critical phase where models process real-world queries. Last Friday, Reuters reported that AI service providers have been snapping up Intel's CPUs with such urgency that chips once considered unsellable are now back in demand. "A meaningful foundry contribution in 2027 would indicate the turnaround is 'complete,'" TECHnalysis Research president Bob O'Donnell told Reuters.
However, the company's stock is now seen as "stretched" by some analysts. D.A. Davidson's Gil Luria and his team maintained their preference for AMD, while Jefferies analysts kept a neutral stance, saying they want to see Intel land larger customers first. Conversely, Citi upgraded Intel to a buy following its involvement in Elon Musk's terafab project, as noted by Investopedia.
Strong Earnings but Supply Constraints Loom
Intel delivered a solid first-quarter earnings report, with revenue climbing 7% year-over-year to $13.6 billion. The Data Center and AI segment was a standout, with revenue jumping 22% to $5.1 billion. For the second quarter, the company guided for revenue between $13.8 billion and $14.8 billion. CEO Lip-Bu Tan highlighted a "significantly increasing" need for Intel's CPUs as AI inference ramps up, while CFO David Zinsner flagged strong silicon demand and ongoing efforts to bolster supply.
However, Zinsner also tempered expectations, telling Reuters that part of the first-quarter boost came from offloading older or lower-spec inventory. He expressed uncertainty about repeating that trick in the second quarter, signaling potential supply constraints ahead.
Cloud Spending and Market Sentiment
The main event for investors this week is the earnings reports from major cloud customers: Alphabet (GOOGL), Microsoft (MSFT), Meta (META), and Amazon (AMZN). Reuters reported that these four tech giants are expected to commit roughly $600 billion to AI this year, a level of spending that is a core demand driver for Intel's chips. If AI budgets continue to cluster among a few suppliers, or if major buyers delay purchases for next-generation server models, Intel's shares could once again outpace fundamentals.
The stock's recent performance marks a significant shift from the company's struggles two years ago, when it was seen as a sluggish PC-cycle stock. Now, it is increasingly viewed as an AI-cycle proxy, tightening the leash on any slip in execution. Investors will be watching not only Intel's forecasts but also whether the largest cloud customers maintain their spending momentum.
