AI Demand Begins to Flow to Intel: Can the Veteran Chip Giant Welcome a Second Growth Curve?

In the medium to long term, Intel's biggest opportunity still lies in leveraging its CPU, data center, advanced packaging, and manufacturing capabilities to participate in AI infrastructure development.

Written by: CoinW Research Institute

Summary

Intel's Q2 2026 financial report has released a key signal: this veteran chip giant is recovering growth, but it is still far from a complete turnaround. This quarter's revenue reached $16.1 billion, a 25% year-on-year increase, indicating that the demand for AI infrastructure is gradually flowing into the traditional chip industry chain. However, for investors, the key question is not whether Intel can simply return to the peak of the PC era, but whether the company can find a new growth positioning in the AI era. Currently, the market has certain expectations for Intel's manufacturing transformation, Foundry strategy, and the value of the domestic chip supply chain in the United States. For future stock price increases, more fundamental verification is needed, including sustained growth in AI-related businesses, Foundry acquiring external customers, smooth progress in advanced processes, and continuous improvement in the company's profitability. In the medium to long term, Intel's biggest opportunity still lies in leveraging its CPU, data center, advanced packaging, and manufacturing capabilities to participate in AI infrastructure development. If these layouts can be converted into real orders and profits, the company will have the opportunity to move from 'cyclical recovery' to 'long-term value reassessment'.

1. Who is Intel? Why is it still worth paying attention to in the AI era?

Intel is one of the most famous semiconductor companies in the world. For decades, its CPU chips have almost monopolized the personal computer market, and the Xeon series processors are also common in data centers. However, in recent years, the growth of the PC market has slowed down, and the AI wave has been mainly dominated by NVIDIA's GPUs, leading to the perception that Intel has 'fallen behind'. However, the development of the AI industry is entering a new stage. Early AI competition mainly revolved around large model training, with GPUs becoming the core computing hardware; as AI applications gradually shift from chatbots to agents and enterprise applications, the market demand for AI inference, real-time computing, and large-scale deployment is increasing, necessitating further expansion of the entire AI infrastructure. A complete AI data center requires not only GPUs but also CPUs to manage system scheduling, data processing, and task management, along with network, storage, advanced packaging, and chip manufacturing capabilities to support it. Therefore, the growth in AI demand does not mean that only GPU manufacturers benefit; rather, it will drive the development of the entire computing infrastructure industry chain. Although Intel is not the leader in the GPU field, it still has a deep accumulation in the CPU ecosystem, data center customers, and chip manufacturing capabilities. This means that as long as the AI industry continues to expand, Intel still has the opportunity to share in the profits.

Table 1-1 Main Links of AI Infrastructure, Data Source: CoinW Research Institute

2. Q2 Financial Report Core: Is Growth Really Back?

Intel announced its Q2 financial report on July 23, 2026, showing significant overall improvement in data.

Revenue recovery. Q2 revenue reached $16.1 billion, a 25% year-on-year increase, exceeding the company's previous guidance upper limit, and the growth rate has significantly accelerated compared to Q1's 7%. This indicates that the recovery in market demand is real and not just due to layoffs or cost reductions.

Improvement in profitability. The adjusted gross margin (Non-GAAP) increased from 41.0% in Q1 to 41.8%, and the adjusted operating profit margin rose from 12.3% to 17.2%. In simple terms, Intel is not only selling more, but it is also making more profit on each chip sold. This is mainly due to the increased proportion of high-value servers and AI chips, as well as cost control.

Significant improvement in cash flow. Intel's operating cash flow increased from $1.1 billion in Q1 to $7 billion in Q2. For semiconductor companies, cash flow is crucial, as advanced process R&D, wafer fab construction, and Foundry business expansion all require continuous investment. The improvement in cash generation capability provides stronger support for Intel's subsequent strategic investments.

However, a full recovery is not yet complete. It is important to note that under the strictest accounting standards (GAAP), Intel's Q2 net loss still reached $11 billion, with a loss of $2.16 per share. This 'huge loss' mainly comes from asset impairment, restructuring costs, and other one-time factors. If these factors are excluded (i.e., Non-GAAP basis), Intel actually achieved a net profit of $2.2 billion. Therefore, a more accurate understanding is that the main business is indeed improving, but historical burdens and transformation investments are still dragging down the reported profits.

Table 2-1 Core Financial Indicators of Intel Q1-Q2 2026, Data Source: Intel Q1/Q2 2026 Financial Results

3. Business Breakdown: Is AI Demand Really Flowing to Intel?

The biggest highlight in Q2 came from the data center and AI business (Data Center & AI), with revenue reaching $6.3 billion, a year-on-year increase of 59%. Although the market is most concerned about NVIDIA's GPUs, CPUs still play a key role in server management and task scheduling in AI data centers. As major cloud providers and enterprises ramp up their AI server investments, the demand for Intel's CPUs and related platforms has also been stimulated. Whether this business can sustain high growth is key to determining whether Intel is truly benefiting from the AI wave. At the same time, the PC business has seen some recovery. Client computing revenue in Q2 was $8.9 billion, a year-on-year increase of 13%. The recovery of the PC market is good news for Intel, as it remains one of its largest sources of revenue. However, the market is aware that the PC business is merely a 'basic plate' and not the 'growth story' of the future.

In addition, data shows that Foundry revenue continues to grow. Q2 Foundry revenue reached $5.8 billion, a year-on-year increase of 31%. Foundry is a key part of Intel's transformation; in the past, Intel only manufactured chips for itself, but in the future, it aims to learn from TSMC and manufacture chips for external customers. This not only represents a change in business model but also aligns with the U.S. strategy to promote the domestic semiconductor industry chain. In recent years, global advanced chip manufacturing has been highly concentrated in Asia, and the U.S. hopes to reduce dependence on a single supply chain. Therefore, Intel is seen as an important carrier of advanced manufacturing capabilities in the U.S. This is also one of the key reasons the market is willing to give Intel a certain strategic valuation. If the Foundry strategy succeeds, Intel's future positioning will no longer be just 'a chip-selling company' but may become an infrastructure platform connecting chip design, manufacturing, and packaging. However, the Foundry is still in the validation stage, and revenue growth does not equate to commercial success. The market is more concerned about whether it can attract more external large customers, whether advanced processes can be smoothly mass-produced, and whether it can ultimately achieve profitability.

Table 3-1 Comparison of Intel's Main Businesses Q1-Q2 2026, Data Source: Intel Q1/Q2 2026 Financial Results

4. Future Outlook: Can Growth Continue?

Intel's guidance for Q3 is revenue of $15.8 billion to $16.8 billion, with adjusted earnings per share of approximately $0.38. If Q3 can maintain revenue levels around $16 billion, it indicates that the growth in Q2 is not a flash in the pan, but that demand is genuinely improving.

In the next 1-2 years, the market will closely monitor three key variables:

(1) The most direct manifestation of current AI demand is the continuous investment by cloud providers and enterprises in building AI data centers. Major tech companies like Microsoft, Google, Amazon, and Meta are still increasing their capital expenditures (CapEx) related to AI, used for procuring computing chips, servers, network devices, and other infrastructure. The focus of the market has shifted from 'whether AI investment is increasing' to 'whether these high expenditures can be sustained and whether they can truly translate into commercial returns'. If cloud providers continue to expand their AI server and data center construction, Intel is likely to continue benefiting from the demand for server CPUs and related computing platforms; however, if AI capital expenditures enter an adjustment phase, the growth of the data center business may also be affected.

(2) Whether the 18A advanced process can be mass-produced. The 18A is Intel's most advanced chip manufacturing process (similar to TSMC's 2nm level) and is key to Intel's return to the first tier of manufacturing. If yield rates do not meet standards or mass production is delayed, market confidence in its manufacturing transformation will be significantly undermined.

(3) Whether Foundry can secure external large orders. Currently, Foundry's revenue growth mainly relies on Intel's internal business. In the future, it must prove that it can attract external large customers like Apple, NVIDIA, and Qualcomm to truly become a second growth curve.

Table 4-1 Intel Q3 2026 Performance Guidance, Data Source: Intel Q2 2026 Financial Results

5. Risks and Summary

The main risks Intel currently faces include: uncertainty in Foundry commercialization, technical risks in advancing the 18A process, intense competition with AMD, NVIDIA, and TSMC, and the need for continuous massive investment in semiconductor manufacturing. If revenue improvements do not cover capital expenditures, cash flow may become tight again. Intel's Q2 financial report proves that 'the worst times may be over', with the main business recovering growth, and AI and data centers providing new increments. However, for investors, this is just a 'ticket to entry'. In the next 1-2 years, the mass production of the 18A process, the expansion of Foundry's external customers, and the sustainability of AI data center demand will determine whether Intel completes a 'cyclical recovery' or achieves a true 'value reassessment'.

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