Is Intel Stock a Buy Right Now?

Intel (INTC) has been experiencing a significant rebound this year, with its stock price up approximately 150% year to date as of October 21. Despite recent volatility, with shares falling about 36% since their June high, the situation may present a buying opportunity. The company's revenue grew by 25% year-over-year to around $16.1 billion in the June quarter, surpassing management's guidance by $1.8 billion.

This growth was driven by a 70% year-over-year surge in revenue tied to artificial intelligence (AI), which accounted for about 70% of revenue.

Server growth was particularly strong, with the strongest on record, and revenue from custom chips designed for specific customers nearly tripling. Analysts project earnings to grow at an annualized rate of 69% in the coming years, supporting the stock's high price-to-earnings multiple. CFO David Zinsner highlighted that AI agents, which carry out multi-step tasks on their own using central processing units (CPUs), could drive significant growth for Intel.

CFO David Zinsner suggested that AI agents may require four to six times as many processors as training AI models, implying further growth potential.

Moreover, Intel's adjusted gross margin improved to nearly 42% in the second quarter, up from around 30% a year prior. The company aims for a 50% gross margin over the long term, indicating that earnings are expected to continue growing faster than revenue. While Intel's foundry business, which manufactures chips for other companies, reported a substantial $2.1 billion loss in the second quarter, management remains optimistic about breakeven by year-end 2027, with a potential delay to 2028 due to start-up costs for new customers.

Despite the stock trading at approximately 60 times this year's expected earnings, it is relatively cheaper at about 43 times next year's estimate.