Intel Has Soared 225% in 2026. Here's Where the AI Stock Could Be By the End of 2028

Intel (NASDAQ: INTC) investors are having a phenomenal year so far, as shares of the semiconductor giant have shot up nearly 225% in 2026 as of this writing.

Intel stock has benefited from multiple favorable developments this year. From its improving financial performance to the growing influence in artificial intelligence (AI) chips to the progress that Intel is making in its foundry business, investors have found several reasons to be upbeat about the stock in 2026.

But can this semiconductor stock sustain its impressive momentum and deliver more gains over the next two and a half years? Let's find out.

Image source: Intel.

Intel's valuation is a sticking point for the stock

Intel's stunning rally in 2026 explains why the stock is trading at a whopping 904 times trailing earnings. That's well above its price-to-earnings (P/E) ratio of 615 at the end of 2025. Additionally, the forward earnings multiple of 147 is on the expensive side, given that the tech-focused Nasdaq-100 index has a forward P/E ratio of 26.

The valuation suggests that Intel stock may have gotten ahead of itself. Even the stock's 12-month median price target of $90 points to a 25% decline. What's more, only a third of the 51 analysts covering the stock rate it as a buy. So, the Wall Street sentiment suggests that Intel stock may not deliver further upside going forward.

However, the company has displayed a penchant for springing huge earnings surprises over the past three quarters. Its bottom line has significantly exceeded analysts' expectations, and that's been key to the massive surge in its stock price. The good news for investors is that there are signs that Intel could continue to outpace consensus expectations.

Booming chip demand, new customers, and improving yields could fuel more upside

Intel released its first-quarter results last month. The company's revenue grew by a solid 7% year over year to $13.6 billion. More importantly, it reported non-GAAP earnings per share of $0.29, up significantly from $0.13 per share in the year-ago period. Analysts would have settled for just $0.01 in earnings per share.

Intel's data center and AI (DCAI) segment reported 22% year-over-year growth in Q1 to $5.1 billion. Meanwhile, the Intel Foundry segment saw revenue jump 16% year over year to $5.4 billion. These two segments together produced 77% of its top line during the quarter. The good news for investors is that both businesses could continue to grow at healthy rates.

In the DCAI business, for instance, the demand for Intel's products is outpacing supply, especially for its server central processing units (CPUs). Not surprisingly, the company is focused on increasing factory output to meet strong demand. That's the smart thing to do, as the massive investment in AI data center infrastructure is turning out to be a tailwind for nearly all the chipmakers.

It is estimated that the top four hyperscalers in the U.S. could boost their 2026 capital spending by 77% to a whopping $725 billion. These companies are looking to get their hands on all the compute hardware they can, which isn't surprising as they need a lot of chips to satisfy their huge contractual backlogs, which run into more than $2 trillion.

So, all the major AI chip companies, including Intel, are benefiting from this massive outlay. Market research firm Gartner estimates that overall AI infrastructure spending could grow by another 32% in 2027 to $1.89 trillion. So, the solid growth of Intel's DCAI business should continue to fuel terrific bottom-line growth for the company.

Meanwhile, Intel's foundry business is gaining impressive traction among customers. The company is reportedly going to manufacture chips for consumer electronics giant Apple. The iPhone maker has been relying on Taiwan Semiconductor Manufacturing for its chip manufacturing. However, TSMC's capacity is constrained by strong demand from Nvidia and other AI chip designers, which explains why Apple is looking at Intel to make its chips from next year.

Even better, Intel says that the manufacturing yield of its advanced 18A process is improving at a nice clip of 7% to 8% a month. Manufacturing yield is the percentage of functional chips produced from a silicon wafer. A higher yield means it costs less to produce a functioning chip, suggesting a potential jump in profitability.

Importantly, there is a strong interest in Intel's 18A process from external customers, suggesting that its foundry business could continue clocking solid growth going forward. Also, the improving yield should be a tailwind for the company's bottom line. In all, it is easy to see why analysts have substantially increased their growth expectations for Intel for 2027 and 2028.

Data by YCharts

The chart above suggests that Intel's revenue will increase in the double digits going forward. Of course, the company could do better than that, given new foundry customers such as Apple and the secular growth opportunity in the AI infrastructure space. But even if it achieves $72 billion in revenue in 2028 and maintains its price-to-sales ratio of 10.4 at that time, its market cap could increase to $749 billion. That suggests potential upside of 24% compared to its current market cap.

However, an acceleration in Intel's growth could lead the market to reward this AI stock with a higher sales multiple, indicating that stronger upside cannot be ruled out. Also, the company's ability to grow earnings at a much stronger pace due to new customer additions and improving yields in the foundry business could be another tailwind for the stock, suggesting it makes sense to continue holding Intel in anticipation of more upside.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.