Intel Soars After an Earnings Blowout. Did This Legacy Tech Company Just Become Wall Street's Newest Artificial Intelligence (AI) Darling?

Over the past two years, Intel (INTC +22.48%) has been working on a turnaround that has started to shape up nicely, as the once legacy tech company transitions into the artificial intelligence sector.

The company took another strong step in that direction last night, delivering blowout first-quarter earnings results that far exceeded Wall Street’s expectations.

Intel reported adjusted earnings per share (EPS) of $0.29, well ahead of consensus estimates that suggested the company would barely break even in the quarter. Revenue of $13.58 billion beat consensus estimates by $1.16 billion.

Furthermore, Intel guided to adjusted EPS of $0.20 in the current quarter and revenue in the range of $13.8 billion to $14.8 billion, once again well ahead of analysts’ estimates.

As of 10:10 a.m. ET, Intel’s stock had risen roughly 23.5%. Did this legacy tech company just become Wall Street’s newest AI darling?

CPUs are back in style

AI is powered by graphics processing units (GPUs), which are chips with parallel processing capabilities, meaning they can run many tasks simultaneously and provide much stronger computing power than traditional computers, which are powered by central processing units (CPUs).

Intel has been making CPUs for decades, but it is not as far along with GPUs as dominant players such as Nvidia.

The good news for Intel is that CPUs have become a critical component for agentic AI, which can take the form of autonomous agents that carry out specific tasks. While GPUs play a big role in the intelligence aspect of AI, CPUs serve a vital role in data movement and workflow processes that enable agentic AI.

During the quarter, Intel saw strong growth in its data center business, with revenue soaring 22% to over $5 billion in the quarter.

“Customers are deploying server CPUs alongside accelerators in a ratio that is moving back toward CPU,” Intel CEO Lip-Bu Tan said on a post-earnings conference call with analysts. “It is great news for Intel Corporation. And it is a structural reason I am confident that the CPU franchise will continue to be a meaningful growth engine for the company in the years ahead, not just the quarters ahead.

Earlier this month, Intel purchased the remaining 49% stake the company did not own in its Ireland chip factory, which the company said was “underpinned by the growing and essential role CPUs play in the era of AI.”

Intel is not only focused on CPUs but is also developing new, cutting-edge GPUs. The company said it hired a chief GPU architect earlier this year to build GPUs that power large language models (LLMs) and, hopefully, develop a product to compete with Nvidia. While much remains to be seen about this aspect of the business, Intel appears razor-focused on becoming a big player in the AI ecosystem.

Intel does appear to have become Wall Street’s latest AI darling. Its stock is now up over 280% in the past year.

While the company is not yet profitable on a GAAP (generally accepted accounting principles) basis and still has work to do in its GPU business, the growing importance of CPUs makes Intel an interesting way to gain more diversified exposure to AI.

Given that the stock has been on a big run, investors should likely consider dollar-cost averaging into this one if they do buy it in the near term.