Intel's Stock Climbs 24% Over Three Months—But Should Investors Buy Now?

Over the past three months, Intel Corporation [INTC] has delivered a notable 24% gain, substantially outpacing both the semiconductor industry’s 6% decline and the broader S&P 500. This rally has drawn considerable investor attention, but beneath the headline surge lies a complex picture of opportunity and risk that deserves closer examination.

The tech giant’s recent outperformance extends beyond market indices. Advanced Micro Devices (AMD) declined 4.5% during the same three-month window, while Qualcomm Incorporated (QCOM) fell 15.2%—making Intel’s ascent particularly striking in a sector grappling with headwinds. Yet the critical question remains: Is this three-month momentum a sustainable trend, or a temporary relief rally masking deeper structural challenges?

AI and Data Center Growth Fueling the Three-Month Surge

Intel’s recent gains are rooted in solid fundamentals within its Data Center and AI divisions. Sequential revenues in this segment expanded 15%, exceeding analyst expectations and reflecting robust demand for traditional server CPUs alongside emerging AI infrastructure needs. The company is witnessing strong order growth and has established strategic collaborations with industry heavyweights like NVIDIA to co-develop custom solutions. Specifically, Intel is crafting a proprietary XEON processor fully integrated with NVIDIA’s NVLink technology, positioning itself as a key player in AI host node infrastructure.

The AI PC market has emerged as another growth engine during this three-month period. AI PC unit shipments grew 16% year-over-year in the latest quarter, driven by partnerships with original equipment manufacturers including HP and Microsoft. Beyond PCs, Intel is also expanding into the Edge AI segment, tapping into yet another high-growth opportunity.

The Dark Side: Supply Shortages and Foundry Losses Persist

Despite robust demand across multiple end markets, Intel faces a critical supply challenge. The company is entering 2026 with depleted inventory buffers, significantly constraining its ability to fulfill customer orders and threatening near-term growth prospects. This supply constraint has already begun to materialize in results.

More troubling is the foundry business’s mounting losses. Intel Foundry reported a $2.5 billion operating loss in the latest quarter, exacerbated by the early ramp of its 18A process node. The company continues to battle yield issues that fall short of internal targets, raising questions about the timeline to profitability. This foundry unit loss remains a major drag on overall profitability and cash generation, forcing Intel to rely heavily on asset monetization and external capital. The company has leaned on proceeds from Mobilieye asset sales, stake sales of Altera, government incentives, and funding from SoftBank and NVIDIA—creating a concerning dependency on outside financial support.

Competitive Pressures Mount Across Key Markets

Intel’s Client Computing Group (CCG) revenues declined to $8.19 billion from $8.77 billion in the prior quarter, despite having benefited from strong AI PC demand. Sequential net sales contracted 4%, reflecting the tug-of-war between growth in AI PCs and weakness in traditional client computing. Lower revenues combined with the early 18A ramp and unfavorable product mix have compressed gross margins.

In the server segment—historically Intel’s most profitable domain—the company faces formidable challenges. NVIDIA’s H100 and Blackwell GPUs have become runaway industry successes, relegating Intel’s server processors to a secondary role in the AI infrastructure race. In the AI PC space, Intel battles intensifying competition from Qualcomm, while AMD continues to erode Intel’s commercial PC market share. These competitive crosscurrents are materially constraining growth potential.

Geopolitical Risk: China’s Chip Independence Initiative

A significant overhang for Intel is its revenue exposure to China, where geopolitical tensions between Washington and Beijing are escalating. China’s stated objective to phase out foreign chips from key telecom networks by 2027, coupled with aggressive domestic chip development initiatives, poses a tangible threat to Intel’s sales pipeline. This policy pivot underscores Beijing’s determination to reduce Western technology dependence—a headwind that could persist for years.

Earnings Estimates Falling, Signaling Weakening Confidence

The market’s confidence in Intel’s near-term trajectory has visibly eroded. Over the past 60 days, 2025 earnings estimates have declined 15.25% to 50 cents per share, while 2026 estimates have dropped 14.04% to 98 cents. This downward revision trend reflects growing skepticism among analysts about the company’s ability to navigate near-term challenges and sustain profitability growth.

Valuation: Cheap, But Possibly for Good Reason

From a valuation perspective, Intel trades at a significant discount. The stock’s forward price-to-sales ratio of 4.29 compares favorably to the semiconductor industry average of 17.78, suggesting the market has priced in considerable caution. While low valuations can attract value investors, they often reflect legitimate concerns about a company’s medium-term prospects—as may be the case here.

The Verdict: Caution Warranted Despite Three-Month Gains

Intel’s three-month stock surge reflects legitimate operational bright spots—particularly in AI infrastructure and emerging markets. However, the company faces formidable headwinds that threaten to derail this momentum. Supply constraints will likely cap revenue growth in the near term. The foundry unit’s losses and external capital dependence raise questions about capital efficiency. Intensifying competition across servers, PCs, and networking is squeezing margins. And geopolitical risks to China revenue represent a looming wildcard.

While the recent three-month rally is encouraging, it appears driven more by sentiment shifts and AI enthusiasm than by a fundamental inflection in Intel’s competitive position. The convergence of supply challenges, competitive pressure, and estimate downgrades suggests investors should approach Intel cautiously. The company currently carries a Zacks Rank #4 rating (Sell), reflecting professional skepticism about near-term risk-reward dynamics. For growth-oriented investors seeking AI exposure, superior alternatives exist among companies with stronger margin trajectories and less structural headwinds.