Intel shares surged in premarket trade, rising roughly 6% after having climbed as much as 14% on Friday, following reports that the company and Apple have reached a preliminary agreement for Intel to manufacture processors for Apple devices. The reported arrangement is the result of more than a year of negotiations and represents a pivotal moment for Intel's foundry effort, which has struggled with losses and skepticism from some market observers.
According to the reports, the U.S. federal government played a material role in facilitating the discussions. The government's involvement follows a prior move in which $9 billion in grants were converted into Intel stock, creating an ownership stake of approximately 10% for the United States.
On the corporate results front, Intel's recent first-quarter performance provides context for investor enthusiasm. The company delivered adjusted earnings per share of $0.29, well above the $0.01 analysts had expected, and reported revenue of $13.58 billion versus a $12.42 billion consensus. Management highlighted robust demand in the data center business, where revenue expanded 22% to $5.1 billion as CPU demand tied to AI workloads strengthened.
Market participants pointed to the Apple reported deal as a decisive near-term catalyst for transforming Intel's foundry profile - shifting the perception from an internally focused, loss-making operation to a credible external contract manufacturer with revenue potential. Realizing that potential, however, depends on Intel's ability to meet Apple's exacting supplier standards and to demonstrate manufacturing performance that satisfies Apple’s requirements.
Analysts already reacted to the news. Bank of America raised its price target on Intel to $96 from $56 but maintained an Underperform rating, noting that a foundry agreement with Apple could yield meaningful revenue upside even as the firm remains cautious on the shares.
Investor optimism was reinforced by a favorable market backdrop. U.S. equities rallied on Friday, with the S&P 500 advancing 0.84% to 7,398.93 and the Nasdaq climbing 1.71% to 26,247.08, both marking record highs that were supported by strength in semiconductor stocks and solid employment data. April non-farm payrolls increased by 115,000, above the consensus, while the unemployment rate sat at 4.3%.
At the sector level, the global semiconductor industry has seen a significant run-up in market value, adding about $3.8 trillion in market capitalization over the previous six weeks, and this expansion has extended beyond AI-focused processors to include traditional CPUs and memory chips.
Company-level dynamics and market conditions combined to shape the intense positive reaction in Intel's stock. The Apple foundry report serves as the primary company-specific driver, supported by better-than-expected quarterly results and a macro environment that has been receptive to semiconductor names. That alignment of factors underlies why investors bid up Intel shares so aggressively.
Still, the path to converting the reported agreement into recurring foundry revenue requires execution. Intel will need to validate manufacturing capabilities that meet Apple's standards and then scale those operations. The timing and the details of how Apple and Intel will operationalize the arrangement were not specified in the reports.
Overall, Friday's market action reflected both a specific corporate development and broader sector momentum. With record index levels, a strong jobs print and a semiconductor sector in pronounced growth, the premarket rise in Intel shares captures the convergence of an apparent strategic win for Intel's foundry business and a highly supportive macro backdrop for semiconductor equities.
Key points
- Intel reportedly reached a preliminary agreement for Apple to have Intel manufacture processors for Apple devices after more than a year of talks.
- The U.S. government facilitated the deal and previously converted $9 billion of grants into Intel stock, creating about a 10% U.S. ownership stake.
- Intel beat first-quarter expectations with adjusted EPS of $0.29 and revenue of $13.58 billion, driven in part by a 22% increase in data center revenue to $5.1 billion amid rising AI-related CPU demand.
Risks and uncertainties
- Execution risk: Intel must prove manufacturing capabilities that meet Apple's stringent supplier standards before the reported deal can translate into meaningful foundry revenue - affecting semiconductor and manufacturing sector prospects.
- Timing and details: The reports described a preliminary agreement without specifying the timeline or contractual specifics, leaving uncertainty about when revenue and production would begin.
- Market skepticism: Despite the potential upside, some analysts remain cautious, as evidenced by at least one firm raising its price target while maintaining an Underperform rating, highlighting continued investor scrutiny in the semiconductor sector.
Tags: Intel, Apple, Semiconductors, Markets