Investment firm Capital Bank upgraded Intel's stock rating from "Market Perform" to "Outperform," citing progress in the chipmaker's manufacturing operations and strong demand for its chips in the AI data center sector. Boosted by this news, Intel's stock rose over 5% on Tuesday.

Analyst John Wen stated in a research note sent to clients on Tuesday that demand from tech giants procuring chips and servers for AI business is driving up sales of Intel's central processing units (CPUs). CPUs are traditional computer chips, often paired with AI chips like Nvidia's graphics processing units (GPUs), for the training and operation of AI models. Wen pointed out that supply chain checks indicate Intel's data center server processors are "almost sold out for the year," and the company may raise prices for these chips.

Wen also mentioned that Intel's manufacturing business has made "significant progress."

Previously, Intel's chip products lost ground in market competition to Advanced Micro Devices and Arm Holdings, prompting the company to focus on revitalizing its manufacturing division—Intel Foundry Services (IFS). However, Intel was caught in a vicious cycle: missteps in manufacturing hampered chip competitiveness, while declining chip sales led to low factory utilization rates, further complicating efforts to return the manufacturing business to profitability. The public release of test results from Nvidia and Broadcom on Intel's latest 18A process technology did not lead to major collaborations with Intel.

Nevertheless, with the appointment of a new CEO, investment from the U.S. government and Nvidia, and the successful launch of PC chips using the 18A process, investor confidence in Intel's ability to turn its situation around is gradually recovering.

Wen stated that supply chain checks in Asia indicate Intel has secured a deal with Apple, which will use Intel's next-generation 18A-P process technology to produce low-end PC chips for its Macintosh computers and tablets. This order would be a significant boost for Intel Foundry Services. In semiconductor industry terminology, Intel's recently introduced 18A process node represents its latest generation of chip manufacturing technology, with 18A-P being an advanced upgraded version of this node.

Analyst Ming-Chi Kuo first predicted in late November last year that Intel might secure a deal with Apple, a report which at the time caused a significant surge in Intel's stock price. Wen referred to this rumored collaboration as Intel "landing its first major customer order."

The Capital Bank analyst also mentioned that he believes the two tech companies are currently in discussions, planning for Apple to use Intel's next-generation 14A process technology in 2029 to produce low-end chips for the iPhone.

Yahoo Finance has reached out to Intel and Apple for comment on these potential collaborations, but neither company has responded yet.

Meanwhile, Wen noted that the yield (referring to the percentage of usable chips produced on a wafer) of Intel's 18A process technology is steadily improving, a situation "sufficient to make us believe that Intel has the potential to become the world's second-largest wafer foundry, ahead of Samsung." Currently, there are only three major players in the global chip manufacturing industry: the industry leader is Taiwan's TSMC, followed by South Korea's Samsung, and the U.S.'s Intel.

Furthermore, Wen mentioned that cloud service arms of tech giants are evaluating Intel's advanced packaging technology for potential use in their custom AI chips. Chip packaging refers to the assembly and testing phase of finished chips. Wen wrote in the report that even if Intel does not actually manufacture these tech giants' custom AI chips, simply handling the chip packaging business would "help Intel gain a foothold in the AI market."

The rise in Intel's stock price on Tuesday brings its cumulative gain over the past year to nearly 140%. Wen set a target price of $60 for Intel; as of Tuesday's early trading close, the stock was trading around $46.70.

Persistently high investment by tech giants in AI data centers is driving continuous growth in related computing demand. Based on this trend, Wen also upgraded the stock rating of Intel's competitor, Advanced Micro Devices, from "Market Perform" to "Outperform," pushing AMD's stock up 5% on Tuesday.