The Intel Turnaround No One Saw Coming: Sold-Out Server CPUs and Apple Knocking at the Door

Intel (NASDAQ: INTC) stock has shot up nearly 150% over the past year, and more gains could be on the way. On Tuesday, KeyBanc Capital Markets analyst John Vinh boosted his rating on Intel stock to the equivalent of a "buy" rating while attaching a $60 price target. Shares of Intel currently trade at around $47 per share.

Why the sudden change of heart? Two key developments are changing the story around Intel's turnaround.

Image source: Intel.

A comeback in the server CPU business

Intel still leads the server CPU market, but the company has been facing a couple of headwinds over the past few years. First, AMD has become far more competitive, stealing market share with its EPYC line of server CPUs. Second, data center spending has shifted toward GPUs as hyperscalers rapidly built out AI data centers.

CPUs are still necessary, though, and that fact is now buoying Intel's server CPU business. According to Vinh, Intel is nearly sold out of server CPUs for 2026 as hyperscalers ramp up data center building activity. Vinh also noted that Intel is toying with a 10% to 15% increase in average selling price across its server CPU portfolio.

Intel's older server CPUs are built on the Intel 7 process node, which is the company's 10nm-class manufacturing technology. Granite Rapids and Sierra Forest use the more advanced Intel 3 process node, while the upcoming Diamond Rapids and Clearwater Forest are expected to use the new Intel 18A process.

Intel isn't expanding the capacity of the old Intel 7 process, and the Intel 18A process is currently ramping. The company has said it's shifting capacity from PC CPUs to server CPUs this year to meet demand, but there's only so much it can do in the near term. Longer term, Intel 18A will provide a growing percentage of the company's total capacity over the next few years, and Intel 14A will follow.

Intel's server CPU business has been under pressure, but now the biggest problem appears to be meeting the soaring demand for its chips. While supply constraints will put a limit on growth this year, investors should expect Intel's data center segment to report strong results in 2026.

The foundry is coming into its own

In addition to strong demand for server CPUs, Vinh also pointed to the foundry business as a key reason for the upgrade. Vinh noted that Apple is considering using Intel 18A for its low-end M-series processors, with potential plans to use Intel for some A-series iPhone chips starting in 2029.

Winning Apple as a foundry customer in any capacity would be an enormous win for Intel. Not only would an Apple deal likely generate billions in revenue for the foundry business, but it would also lend Intel Foundry some much-needed credibility. With foundry leader TSMC unable to fully meet demand for its advanced processes, Intel could swoop in and win some business from the world's top chip designers.

Panther Lake, Intel's first product that uses the Intel 18A process, has generated some positive press in the lead-up to the first systems shipping later this month. While Intel's PC business faces some challenges this year with memory chip prices spiraling higher, Panther Lake's success may help attract additional foundry customers.

Could Intel stock hit $60?

Is Vinh's $60 price target realistic? I would argue that it's actually pessimistic. Intel's turnaround is still going to take time, and it's unclear exactly when meaningful foundry revenue from external customers will start coming in. But Intel's server CPU business is seemingly booming, its PC business is about to be buoyed by Panther Lake, and the company appears to be on the cusp of winning some major foundry contracts.

Good news for the foundry business could easily propel the stock past $60 this year. In the long run, Intel has a real shot at becoming a major player in the foundry business, behind TSMC. For long-term investors, Intel stock looks like a buy.

Timothy Green has positions in Intel. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Intel, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.