Key Points
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The CPU-to-GPU ratio in AI data centers is shifting in favor of CPUs, and that’s great news for Intel investors.
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Intel remains the dominant player in the server CPU market.
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Analysts haven’t raised their Q2 EPS estimates by much for Intel, potentially paving the way for a big earnings beat.
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With massive gains of 357% over the past year, Intel (NASDAQ: INTC) has emerged as a top semiconductor play due to the company’s fast-improving financial health and its growing influence in artificial intelligence (AI) chips.
However, Intel stock has slipped 25% from the 52-week high it reached on June 30. The company will release its second-quarter 2026 earnings report after the market closes on July 23, and there is a good chance the stock will regain momentum, thanks to a recent revelation from foundry giant Taiwan Semiconductor Manufacturing.
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Let’s take a closer look at this potential development that could spark a rally in Intel’s shares.
Image source: Intel.
TSMC notes that AI is driving an improvement in CPU demand
Foundry giant TSMC recently released its Q2 earnings report. Management noted on the earnings call that the “emergence of agentic AI is leading to a resurgence in the role of CPUs in AI data centers.” It is worth noting that AI data centers have primarily relied on graphics processing units (GPUs) to handle AI workloads, such as training large language models (LLMs).
However, the proliferation of agentic AI applications has brought CPUs back in focus in AI data centers. That’s because CPUs are good at performing complex tasks by breaking them down into multiple steps, and they also help reduce workloads on GPUs, which can handle other compute-intensive tasks. As a result, there is a stark shift in the CPU-to-GPU ratio in data centers that handle agentic AI workloads compared with those running traditional AI models.
Market research firm TrendForce estimates a 50-50 split between CPUs and GPUs in agentic AI data centers. For comparison, LLM-centric AI data centers have a CPU-to-GPU ratio of 1:4 to 1:8. This is great news for Intel, which is the leading player in the server CPU market. The company’s revenue share of server CPUs stands at an estimated 54%, according to Mercury Research.
Of course, it has been losing ground to AMD in this market, but Intel is taking concrete steps to ensure that it remains a key player in this fast-growing space. AMD estimates that the server CPU market could clock $120 billion in annual revenue in 2030, growing at a compound annual growth rate of more than 35% through the end of the decade.
Even if Intel manages to hang on to a 50% share of this space, it could generate $60 billion in annual revenue from server CPU sales in 2030. That will be a major improvement over Intel’s data center and AI (DCA) revenue of $16.9 billion in 2025. However, it is worth noting that this segment also includes revenue from sales of other AI accelerators, such as custom processors.
So, Intel could report much stronger growth in its DCAI revenue when it releases its Q2 report, which could translate into a solid bottom-line beat.
Favorable server CPU pricing will be a tailwind for Intel’s earnings
Analysts anticipate Intel to swing to earnings per share of $0.22 in Q2 from a loss of $0.10 per share in the year-ago period. What’s worth noting is that the consensus estimate sits only slightly ahead of Intel’s guidance of $0.20 per share.
So, don’t be surprised to see Intel’s earnings easily surpass analysts’ expectations, as the company recently confirmed to tech-focused online publication Tom’s Hardware that it is increasing the prices of its CPUs due to tight supply. This could give this semiconductor stock a much-needed boost following its July 23 report, making it a good time for investors to consider buying before it regains its mojo.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
