Why Intel Stock Is Surging Today

Intel (NASDAQ: INTC) stock is gaining ground Wednesday following the unveiling of two new artificial intelligence (AI) products. The company's share price was up 3.5% as of 12:30 p.m. ET. The semiconductor stock had been up as much as 5.5% earlier in the day.

Yesterday, Intel launched its Xeon 6 central processing unit (CPU) and its Gaudi 3 AI accelerator. The new chips are central to the next stages of the company's strategy to gain ground in the data center AI space.

Intel debuts its next-generation AI solutions

Intel reports that its Xeon 6 processor delivers twice the performance of its predecessor and has been specifically tailored for artificial intelligence applications. Meanwhile, the company says that its Gaudi 3 AI accelerator offers a 20% throughput improvement and twice the performance on a price basis, compared to Nvidia's H100 for inference using Meta Platforms' LLaMA 2 70B large language model (LLM). The Gaudi 3 is still slower than Nvidia's H100 and H200, but its lower pricing and solid performance specs could help attract customers.

What comes next for Intel?

Thus far, Intel has struggled to score significant wins in the AI space. Nvidia's advanced graphics processing units (GPUs) continue to be the go-to hardware for AI inference, and Advanced Micro Devices also has its own CPU and GPU offerings that add to the competitive pressures in the data center market.

Intel is also losing ground to AMD in the PC CPU market, and the recent launch of AI PCs hasn't delivered the positive margin catalyst that many had previously anticipated. Further complicating matters, Intel is losing billions as it attempts to build up its chip fabrication business so that it can accommodate substantial business from third-party customers. While the company's fab business has landed some significant contracts lately, competing with Taiwan Semiconductor Manufacturing in the space will be highly resource-intensive -- and Intel's financial footing has been looking shaky.

Some reports have emerged that the company could split its chip design and chip fabrication units into separate companies as a result of these challenges. Reports have also surfaced that Qualcomm is interested in buying some or all of Intel. While regulatory and valuation challenges make a full-on buyout unlikely, it's possible that Intel could sell off some units or assets to improve its financial position.

Even with today's pop, Intel stock is still down roughly 53% in 2024's trading. The stock looks cheap by some metrics, but the business has been struggling lately -- and there's a high degree of uncertainty surrounding its path forward.