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Shares of Intel Corporation (NASDAQ: INTC) rallied 34.3% in September, according to data from S&P Global Market Intelligence.
Though Intel stock is up significantly for the year, it entered September well below its all-time high set in June. After exceeding $140 per share that month, Intel's stock fell to the mid-$80 range by the end of August.
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Due for a rally, Intel stock was propelled higher by several news items. These mainly centered on the growing importance of server CPUs for agentic AI applications. A potential collaboration with memory giant SK Hynix (NASDAQ: SKHY) also contributed.
Early in September, DigiTimes reported that Intel will raise PC CPU prices by 10% this month. Intel has been transitioning its capacity toward server CPUs this year, and away from PC chips. With agentic AI taking off, demand for server CPUs has skyrocketed because it is much more CPU-intensive than initial chatbot-style generative AI. With Intel reducing its supply of PC chips, it appears Intel still feels it can raise prices due to the shortage. That's a good sign that demand for Intel chips remains strong.
The focus on CPUs only grew with the introduction of Meta Platforms' (NASDAQ: META) Muse personal AI agent on Sept. 8. Muse was very well-received when it was unveiled, and investors became excited about its growth prospects. Each Muse agent has its own dedicated virtual machine, security parameters, and browser, so each agent requires its own CPU.
While it appears that Muse primarily uses Advanced Micro Devices CPUs for now, Muse should still boost overall demand for server CPUs, which are in short supply. Furthermore, Muse likely won't be the only AI agent on the market, and it served as a proof point for CPU-intensive AI tasks.
Further cementing this demand story, Intel CEO Lip-Bu Tan was interviewed shortly after Muse's introduction last month, and told the interviewer that Intel could only support about half of what its customers were requesting for server CPUs.
In addition to the outsize demand for its bread-and-butter CPU products, Reuters reported toward the end of the month that Intel was collaborating with Korean memory giant SK Hynix, potentially at Intel's new Ohio campus. SK Hynix is the leader in HBM, a crucial technology for AI.
While the talks were deemed "exploratory," the report augmented rumors that first circulated in August that Intel had been chosen to produce "base dies" for SK Hynix's high bandwidth memory (HBM).
Intel had already hired former SK Hynix CEO Seok-Hee Lee back in June to head Intel Foundry's advanced packaging and system integration division. Thus, the September report seemed to confirm that something more concrete is happening between the two companies .
Intel remains a controversial stock. While the company still has its skeptics, it has also blown away its revenue and earnings estimates each of the last couple of quarters.
Will the turnaround continue? Investors will find out when the company reports third-quarter earnings on Thursday, Oct. 29.
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Billy Duberstein and/or his clients have positions in Intel, Meta Platforms, and SK Hynix. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Meta Platforms. The Motley Fool has a disclosure policy.
Why Intel Rallied in September was originally published by The Motley Fool
