HSBC on Tuesday elevated Intel Corp to a Buy recommendation from Hold and established a new price target of $95, up from $50, asserting that the market has yet to fully incorporate the potential of Intel’s server central processing unit (CPU) franchise into the stock’s valuation.
The bank notes that Intel shares have climbed roughly 60% since April 1, a rally that followed two strategic developments: the company’s repurchase of a 49% equity stake in its Ireland fabrication joint venture and Intel’s inclusion in the Terafab initiative alongside SpaceX, Tesla, and xAI as a foundry partner. While HSBC acknowledges these announcements as supportive of Intel’s balance sheet and foundry prospects, the firm argues that investors are overlooking a separate, material catalyst - accelerated demand for higher-end Xeon server processors.
HSBC’s central thesis
Frank Lee, the HSBC analyst, identifies a server CPU-led expansion as the primary near-term earnings driver. The analyst emphasizes management’s decision to shift internal manufacturing capacity on the Intel 3 and 7 process nodes away from PC processor production and toward server CPU output - a move management disclosed during the company’s fourth-quarter 2025 earnings call in response to what was described as an "unexpectedly high" surge in demand for premium Xeon parts.
Lee projects that this manufacturing reallocation will produce year-on-year server CPU shipment growth of 20% in both 2026 and 2027. In a context where supply constraints are expected to persist, he also models average selling price (ASP) increases of 20% in 2026 and an additional 10% in 2027. HSBC argues the combined effect of higher volumes and stronger ASPs will push Intel’s gross margins well above prevailing Street consensus.
Revenue and sensitivity outcomes
HSBC’s estimates for Intel’s Data Center and AI (DCAI) revenue stand at $22.8 billion for 2026 and $29.1 billion for 2027, figures that are 16% and 33% above the Street, respectively. The bank also ran a downside sensitivity: even under a bear-case assumption of only 10% server CPU shipment growth in 2027, its analysis suggests roughly 38% upside to the current share price.
Valuation approach and foundry treatment
On valuation, HSBC applies a sum-of-the-parts methodology. The bank uses a 26x target price-to-earnings multiple on its 2027 estimate of Intel’s core business earnings and intentionally excludes the foundry business from this core multiple due to lingering uncertainty about external foundry customers. HSBC notes that foundry-related announcements have corresponded with around a 60% rally in the share price, but maintains the view that substantial server CPU momentum remains underappreciated by the market.
Implications
HSBC’s upgrade rests on specific operational shifts and market dynamics called out by Intel management and quantified in the bank’s model: dedicated capacity reallocation to server CPUs, forecasted shipment and ASP gains, and materially higher DCAI revenue expectations versus consensus. Those assumptions together underpin the bank’s more bullish valuation.