Intel Stock Has Absolutely Skyrocketed. Here's What Is Going On -- and Why I Think the Stock May Be Overbought.

Shares of Intel (NASDAQ: INTC) have skyrocketed over the past 12 months, rising more than 300% to around $94 as of this writing. That kind of move is rare for any mega-cap, let alone a chipmaker that just two years ago was being written off as a casualty of the artificial intelligence (AI) boom. The rally reached a fever pitch on April 24, when shares surged 24% in a single session -- the stock's best day since 1987 -- after the company reported first-quarter results.

And shares have surged even more since then, leaving many investors wondering what is going on with Intel stock.

So what, exactly, is going on?

Here are four things happening at the chipmaker that have likely captured investors' attention and helped drive the stock's huge run-up.

Image source: The Motley Fool.

1. A CPU comeback in the AI era

For years, central processing units (CPUs) have looked like an afterthought next to AI chipmaker Nvidia's graphics processing units (GPUs). But that narrative is shifting -- and Intel is positioned to benefit.

Intel's data center and AI segment posted revenue of $5.1 billion in Q1, up 22% year over year. That marks a meaningful acceleration from roughly 9% growth in the fourth quarter of 2025. Further, the company said its collective AI-driven businesses now account for 60% of revenue and grew 40% year over year.

"Customers are deploying server CPUs alongside accelerators in a ratio that is moving back toward CPU," CEO Lip-Bu Tan said during Intel's first-quarter earnings call. The driver appears to be agentic AI -- workloads that plan and orchestrate tasks across infrastructure and require far more CPUs working alongside GPUs.

And demand is now outpacing what the company can produce.

2. Margins are turning

Beyond the top line, the underlying profitability picture has improved meaningfully. Intel's first-quarter non-GAAP (adjusted) gross margin came in at 41%, up from 39.2% in the year-ago quarter and about 650 basis points above its own guidance. Further, Intel's adjusted operating margin expanded from 5.4% to 12.3%.

All of this led to Intel's adjusted net income climbing an extraordinary 156% year over year to about $1.5 billion.

Of course, the picture under generally accepted accounting principles (GAAP) is messier. Intel reported a GAAP net loss attributable to the company of $3.7 billion. But the main issue wasn't from regular operations. Profitability was weighed down by a $4.1 billion restructuring and impairment charge, largely tied to its Mobileye reporting unit.

3. Big strategic backers

Another factor giving investors confidence is the impressive list of strategic backers supporting Intel.

Last year, the U.S. government converted unpaid CHIPS Act and Secure Enclave funds into roughly a 10% equity stake, making it the company's largest shareholder. Nvidia subsequently invested $5 billion, and SoftBank added another $2 billion.

More recently, Intel announced a multiyear collaboration with Alphabet's Google for its Xeon processors; its Xeon 6 was selected as the host CPU for Nvidia's DGX Rubin NVL8 systems; and it joined the Terafab semiconductor project alongside SpaceX, xAI, and Tesla.

Each of these moves provides validation -- and, in several cases, fresh capital -- for a company that just two years ago was scrambling for business momentum and resources.

4. Manufacturing is finally showing progress

Then there is Intel's longest-running source of skepticism: its manufacturing operation.

Intel's foundry revenue rose 16% year over year to $5.4 billion in Q1 -- a sharp acceleration from roughly 4% growth in the fourth quarter of 2025. Notably, the company said its 18A process node has entered high-volume manufacturing. Tan added during the company's first-quarter earnings call that 18A wafers are now running ahead of internal projections and that the next-generation 14A node is maturing faster than 18A did at a comparable stage.

Indeed, the company said its demand for advanced packaging has shifted from expectations measured in "hundreds of millions" to "billions of dollars per year."

There's plenty to like in Intel's recent results. The trouble, however, is that the stock arguably has priced much of it in already -- and then some.

After more than tripling over the past year, Intel commands a market capitalization of about $470 billion as of this writing. Showing how expensive the stock has become, the forward price-to-earnings ratio is in the high 80s.

And the spending picture compounds the concern. With significant capital expenditures, Intel's first-quarter adjusted free cash flow was negative $2 billion in the quarter.

That combination -- a stock priced for near-flawless execution paired with heavy ongoing investment -- arguably makes the recent move in Intel shares look like it is flirting with euphoria. Sure, the underlying business is genuinely improving -- and the growth opportunity is huge. But at these levels, even great results may not be enough.

Daniel Sparks has clients with positions in Tesla. The Motley Fool has positions in and recommends Alphabet, Intel, Nvidia, and Tesla. The Motley Fool has a disclosure policy.