Most people never think about the chip inside their laptop. You pick a brand, a screen size, and a price, and the processor just comes with it.
For decades, that processor was usually made by Intel. That quiet default turned the company into one of the most valuable names in tech.
I’m clearly not alone in owning an Intel machine. Intel (INTC) still sold $8.1 billion of client computing chips, mostly for PCs, in the third quarter alone, out of $16.5 billion in total revenue, according to its earnings release.
The newer engine is the data center. “The resurgence in demand for CPU is a meaningful tailwind for us along our transformation journey,” said CEO Lip-Bu Tan on the company’s Oct. 29 earnings call.
However, a subtle shift has emerged in how long that transformation might take.
According to a Bank of America research report seen by TheStreet, Intel’s turnaround has been pushed out as a collapse in PC shipments and tight chip supply outweigh its booming server business.
Bank of America cuts Intel’s target by $45
The headline numbers looked fine at first. Third-quarter revenue rose 21% from a year earlier, and data center sales jumped 78% to $7.3 billion, Intel said.
The outlook did the damage. Intel guided fourth-quarter revenue to $15 billion to $16 billion, against a consensus of about $17 billion, Yahoo Finance reported. It also expects non-GAAP gross margin to fall to 38% from 44.1%.
“We do not expect a sustained recovery until memory availability improves and pricing begins to normalize,” said CFO David Zinsner on the call.
Investors didn’t wait. Intel stock fell nearly 29% on Oct. 30, its worst day since 1974, wiping out nearly $140 billion in market value, Yahoo Finance noted.
Related: Intel CEO reveals a PC problem as Goldman cuts stock target
Analyst Vivek Arya downgraded Intel to Neutral from Buy and cut his price target to $100 from $145 in a note titled “Downgrade to Neutral, turnaround pushed out on PC/supply headwinds.”
“In our view, the stock has not communicated enough traction with external foundry customers, while its data center strength is offset by a surprisingly sharp drop in PC shipments,” wrote Arya.
He expects PC shipments to fall 25% to 30% from the third quarter to the fourth, with “further inventory correction expected in 1H27 [the first half of 2027].”
The PC market just had a brutal quarter
Arya isn’t guessing about the PC slump. The broader market data says the same thing.
Worldwide PC shipments fell 22.4% from a year earlier to 55.4 million units in the third quarter, according to Gartner data reported by TechEdge AI. IDC counted a 20.1% drop, PC TestBench reported.
More Intel:
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- Sandisk CFO admits higher prices are hurting consumer sales
The culprit is memory. “DRAM costs surged five times year-over-year in the second quarter,” said Namrata Banerjee, a principal researcher at Gartner. “The impact of higher memory and storage costs is now fully reflected in PC pricing.”
Given that backdrop, it’s easy to understand why Arya thinks the PC side will drag on Intel well into 2027. He cut his 2027 earnings estimate by 16% to $1.69 a share.
The server side is a different story. “We now expect industry server CPU units to grow more than 30% in both 2026 and 2027,” Zinsner said on the call.
Arya agrees the demand is real but sees two catches. Supply of key packaging materials is tight, and Intel’s chips “are not yet technically competitive against AMD/ARM-based rivals that are growing 2x-4x faster,” he wrote.
Intel’s foundry has to earn its keep
The bigger question is the foundry, the business that makes chips for other companies.
Arya’s $100 target values Intel at about $550 billion. He splits that into roughly $450 billion for Intel’s chip products and about $100 billion for the foundry.
That foundry slice assumes about $8 billion to $10 billion a year in outside business. In the third quarter, Bank of America estimates external foundry revenue was about $406 million.
By my math, that’s roughly $1.6 billion a year at the current pace. Intel would need to grow outside sales five- to sixfold to justify the slice Arya already gives it.
Tan says help is coming. “We’re going to have a couple of customers ready to announce in the next two quarters,” he said on the call.
Much will likely depend, however, on whether those customers sign for real wafer volume, not just packaging work.
Arya lists potential deals with Apple, MediaTek, and Musk’s Terafab project, but he isn’t adding them to his base case until terms are clear.
I’d also watch the price.
Bank of America set its $100 target when Intel traded at $92.07. After the Oct. 30 crash left the stock in the high $60s, that same target implies roughly 45% to 50% upside, by my math.
That gap explains why Arya stopped short of a Sell. He still sees a path to $5.89 in earnings per share by 2030 if foundry wins arrive between 2028 and 2030.
For now, he wants proof first. “We acknowledge INTC’s longer-term ability to develop a competitive domestic foundry with any signs of traction potentially driving a recovery in a relatively under-owned stock,” wrote Arya.
