CPU returns to the main stage of AI, Intel's Q2 financial report faces its most crucial battle.

```

Intel is standing at a critical turning point. As AI workload structure shifts from training to inference, and then to agents, the strategic position of the CPU in data centers is quietly rising again, and the investment logic of this veteran chip giant is being repriced by the market.

After the US market closes on July 23, Intel will announce its Q2 earnings report.

This is not an ordinary quarterly earnings disclosure—against a backdrop of over 160% year-to-date stock gain and valuation still hovering at around 87 times expected earnings, Wall Street is demanding that management deliver on revenue growth, gross margin improvement, and sustainable growth guidance, and present concrete evidence that both data center CPU demand and the foundry business transformation have entered quantifiable realization phases. Most analysts are betting that this earnings release will exceed the company's original guidance, with HSBC raising its target price by 100% to $200, setting the highest target among Wall Street analysts.

However, the market's high expectations themselves constitute a risk. After Intel announced better-than-expected guidance for Q1, its share price jumped 19% after-hours, followed by a sharp rally driven by the AI chip craze and domestic manufacturing policy expectations; but as of July 17, the share price had fallen significantly from its June high to around $95, and the Philadelphia Semiconductor Index had dropped more than 20% from its peak during the same period, entering a technical bear market. Whether the earnings report will serve as a new catalyst for gains or turn into a "sell the news" event will largely depend on whether Intel can demonstrate its ability to convert AI demand into deliverable capacity and sustainable profits.

Fundamentals Improving, But High Bar Already Set

Intel's Q1 revenue was $13.6 billion, up 7% year-on-year, marking the sixth consecutive quarter of surpassing its own expectations and laying the fundamental foundation for this earnings report.

Non-GAAP EPS was $0.29, up significantly from $0.13 in the same period last year; adjusted net profit grew 156% to $1.5 billion; operating margin improved from 5.4% to 12.3%; adjusted R&D and administrative expenses fell 9% year-on-year, indicating progress in restructuring and cost control.

For Q2, Intel's official guidance is revenue of $13.8–14.8 billion, with a midpoint of $14.3 billion; non-GAAP gross margin around 39%, and non-GAAP EPS of $0.20. This guidance itself sends positive signals of strong server demand and improved product supply.

But the real bar is significantly higher than this.

According to reports, the current market is not satisfied with Intel merely "meeting" guidance, but demands that management simultaneously prove revenue growth, gross margin improvement, and sustainable future earnings guidance. If data center revenue is strong but gross margin remains at about 39%, the market may judge that incremental revenue is being offset by manufacturing costs or supply bottlenecks; only if the Xeon product portfolio’s average price and total revenue growth lead to higher profitability will the CPU demand recovery truly be reflected in profit statements.

It is noteworthy that Intel is still recording GAAP net losses—Q1 GAAP net loss was $3.7 billion, or a loss of $0.73 per share, mainly due to large restructuring charges. This means the current P/E ratio of about 87 times is essentially a speculative bet on improving earnings slope, rather than a margin-of-safety investment based on current free cash flow or static valuation.

CPU Renaissance: AI Agents Reshaping Computing Demand Structure

In the past two years, the AI narrative has been almost monopolized by GPUs, with CPUs reduced to a supporting role in the AI arms race. But as AI workloads shift from model training to inference, and then to agents (Agentic AI), the market is re-recognizing the irreplaceable role of CPUs in system architecture.

Agentic AI requires continuous tool invocation, code execution, retrieval, database access, task scheduling, memory management, and multi-process orchestration, putting the CPU back in a bottleneck position for end-to-end throughput. According to data from Tom's Hardware cited by Investing.com, the CPU-to-GPU ratio in AI servers has shifted from 1:8 toward 1:4, and may converge to 1:1 in agentic scenarios, meaning the same GPU clusters will require more server CPUs, directly pushing up Xeon demand, delivery cycles, and pricing power.

Intel CEO Pat Gelsinger stated at J.P. Morgan’s 54th annual Global Technology, Media & Communications Conference that Intel 18A has enabled Panther Lake mass production, yield rates are improving about 7% monthly—exceeding Intel’s internal expectations; as the focus of AI infrastructure shifts from training to inference, the CPU-to-GPU ratio is accelerating towards 1:1, and may even reach 4:1.

Q1 revenue from the Data Center and AI segment was $5.1 billion, up 22% year-on-year, significantly faster than the 1% growth in client computing, confirming this structural transformation. Nvidia chose Intel Xeon 6 as the host processor for its DGX Rubin NVL8 systems, and Google announced it would expand the use of Intel processors for cloud workloads and co-develop custom infrastructure processing chips—both endorsements of Intel’s presence in AI data centers.

TSMC’s Q2 results also provide cross-verification at the industry level. TSMC’s Q2 revenue (in USD) reached $40.2 billion, at the high end of guidance, with a gross margin of 67.7%, and is expected to rise further to $44.6–45.8 billion in Q3; management emphasized multi-year sustainability of AI demand, and pointed out that AI agents are driving renewed data center CPU demand, indicating that AI infrastructure is evolving from simply stacking GPUs to a systematic expansion of GPUs, CPUs, advanced packaging, etc.

In addition, Intel recently raised server CPU prices, with the new suggested customer price for the data center-class Xeon 6980P at $13,955, an increase of $1,495 from $12,460 in 2025, confirming the market’s judgment that "demand exceeds supply" rather than mere cost pass-through.

Foundry Transformation: Order Narrative Still Needs Yield & Cash Flow Validation

The foundry business is both the determinant of Intel’s valuation ceiling and the biggest current risk.

In Q1, Intel Foundry segment revenue was about $5.4 billion, up 16% year-on-year, but about $5.25 billion of that was eliminated internally, indicating that the vast majority still comes from manufacturing services for Intel’s own products, with external customers representing a very small proportion; the segment posted an operating loss of about $2.44 billion, further widening from about $2.32 billion a year prior.

18A is the technological fulcrum of this transformation. Intel announced in June that 18A-P had entered risk production, claiming that compared to 18A, it offers 9% higher performance at the same power, or 18% lower power at the same performance—helping attract external design clients. But risk production is not the same as mass production, nor does it mean economic yield rates have been achieved. According to Investing.com, reports that “wafer-to-wafer yield fluctuations have been resolved” mainly come from supply chain research, not official Intel disclosures, so during the earnings Q&A, statements about yield rates, ramping capacity, customer tape-outs, and mass production timelines may affect the stock price more than current EPS.

On July 13, Intel announced a €5 billion (about $5.7 billion) expansion investment in its Leixlip, Ireland manufacturing campus to upgrade its facilities, increase manufacturing capacity, and boost Xeon 6 and future Xeon CPU production efficiency, using Intel 3 process technology and existing cleanroom space—no new fabs required. This investment is strategically significant against a backdrop of rising server chip demand, but also means the foundry business remains unprofitable with continuing capital expenditure pressures.

Potential foundry relationships with Apple, Tesla, SpaceX, xAI, and Nvidia should be seen as long-term options rather than immediately capitalizable revenue. Customer testing of 18A or evaluation of packaging services is fundamentally different from full-scale mass production, which could take several years. The most reasonable investment framework is to view these relationships as upside call options for the foundry business, while anchoring near-term valuation in verifiable data center CPU revenue, external foundry orders, and chip capacity and yield data.

Technical Analysis: $94 Double-Bottom Support Critical

Technically, Intel’s share price is testing the major double-bottom support range of $94 to $96 on the daily chart. The recent close has fallen below the 50-day simple moving average ($109.68) and below the previous resistance-turned-support level of $107.21.

The current Relative Strength Index (RSI) is about 37, indicating strong downside momentum close to oversold territory, but no clear reversal signal yet. Analysts believe that if $94 support holds, the stock could rebound to $107.20 and then challenge $116.50; if the close falls below $94, the double-bottom pattern will break, with further support at the $84.50 and $75.40 zones.

Risk Statement and DisclaimerThe market carries risks, and investments should be made cautiously. This article does not constitute individual investment advice and does not take into account specific users’ investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their own circumstances. Investing based on this is at your own risk. ```