Intel (NASDAQ:INTC) shares gained nearly 4% in premarket trading on Monday after JPMorgan upgraded the semiconductor manufacturer from Underweight to Neutral and the company disclosed an agreement to manufacture chips for Tesla (NASDAQ:TSLA) using its forthcoming 14A production process.
The brokerage’s revised recommendation follows a decline of approximately 36% in Intel’s share price from its June peak. JPMorgan analyst Harlan Sur cited a more balanced risk-reward outlook as the stock approached the firm’s $85 price target.
The developments come as Intel continues a multiyear restructuring programme focused on improving manufacturing performance, developing its contract chipmaking business and addressing competitive pressures in the processor market.
JPMorgan Raises Intel Rating to Neutral
JPMorgan upgraded Intel from Underweight to Neutral in a research note issued late on Friday.
Analyst Harlan Sur said the company’s recovery would require several years but acknowledged progress in the execution of its restructuring strategy.
Sur indicated that his confidence in Intel’s operational recovery had increased, particularly following developments in next-generation semiconductor manufacturing.
The analyst also identified artificial intelligence as a potential source of demand for Intel’s products and manufacturing services.
JPMorgan’s revised assessment follows a period of share price volatility, with Intel declining approximately 36% from its June high.
The brokerage maintained a price target of $85, according to the information provided.
The upgrade reflects a change in JPMorgan’s assessment of the balance between potential risks and returns rather than a conclusion that Intel’s restructuring has been completed.
Manufacturing Progress Supports Recovery Expectations
Sur pointed to improvements in Intel’s execution under Chief Executive Officer Lip-Bu Tan, particularly in the development of advanced semiconductor production technologies.
The analyst expects demand associated with agentic artificial intelligence systems and constrained supplies of advanced chips to contribute to higher earnings estimates through 2027.
Agentic AI refers to artificial intelligence systems designed to perform tasks and coordinate activities with varying degrees of autonomy.
Such applications can require substantial computing capacity, potentially increasing demand for processors and advanced semiconductor manufacturing.
JPMorgan’s outlook also reflects expectations that demand for AI-related computing infrastructure will continue influencing the semiconductor industry.
However, the brokerage remains cautious about Intel’s competitive position in several established markets.
JPMorgan Highlights Continuing Competitive Pressures
Despite the upgrade, Sur identified ongoing challenges in Intel’s core processor businesses.
The analyst expects the company to continue losing market share in server and personal computer processors, where it competes with other semiconductor manufacturers.
He also noted that Intel’s external foundry business remains relatively small.
Intel Foundry provides semiconductor manufacturing services to external customers, an activity the company is seeking to expand alongside production for its own products.
Building a larger external customer base is an important part of Intel’s strategy to improve the utilisation and commercial viability of its manufacturing facilities.
JPMorgan’s assessment therefore combines expectations of operational improvement with continuing uncertainty over market share and the development of the foundry business.
Tesla Agrees to Use Intel’s 14A Manufacturing Process
Intel separately disclosed that Tesla has agreed to use its forthcoming 14A semiconductor manufacturing process.
The agreement makes Tesla the first high-profile external customer identified as committing to Intel’s most advanced planned production node.
The 14A process forms part of Intel’s roadmap for developing increasingly advanced chip manufacturing technologies.
The Tesla agreement represents a commercial development for Intel’s external foundry operations, which have faced questions about their ability to attract customers beyond Intel’s internal product divisions.
Chief Executive Lip-Bu Tan had previously indicated that the company could reconsider the future of its advanced foundry development plans if it failed to secure sufficient external customer commitments.
The announcement provides evidence of customer interest in the forthcoming process, although the information released does not specify the agreement’s financial value, production volumes or expected contribution to Intel’s revenue.
The commercial impact will depend on subsequent manufacturing arrangements and execution.
Intel Reports 18A Production Ahead of Internal Targets
Intel also provided an update on its current 18A manufacturing process, reporting that production output was running ahead of the company’s internal targets.
The 18A node is part of Intel’s efforts to expand its advanced semiconductor manufacturing capabilities.
Performance against internal production targets is relevant to the company’s ability to manufacture chips efficiently and support customer requirements.
The update comes as Intel seeks to demonstrate progress in manufacturing execution while developing future process technologies.
Although the company reported output ahead of its targets, the information provided does not include detailed production volumes or profitability figures associated with the process.
The 18A update and Tesla’s commitment to 14A represent separate developments within Intel’s manufacturing strategy.
Semiconductor Shares Benefit From Broader Market Recovery
Intel’s premarket increase coincided with gains across major US equity indices.
The Nasdaq Composite was indicated approximately 1.1% higher, while the S&P 500 advanced around 0.5%.
The broader market recovery followed recent declines in technology and semiconductor stocks, with investors reassessing valuations and expectations for artificial intelligence-related investment.
Intel’s competitors, including Advanced Micro Devices (AMD) and Taiwan Semiconductor Manufacturing Company (TSMC), also remained in focus.
The Tesla agreement has prompted renewed attention to Intel’s ability to compete for advanced semiconductor manufacturing contracts.
TSMC remains an important competitor in the global contract chipmaking market, while AMD competes with Intel in processor products.
Intel’s ability to expand its foundry customer base will depend on manufacturing performance, technology development, commercial terms and customer demand.
Intel’s Multiyear Restructuring Remains in Progress
The JPMorgan upgrade and Tesla foundry agreement provide new information for investors assessing Intel’s restructuring strategy.
The brokerage has recognised improvements in manufacturing execution while maintaining reservations about the company’s processor market share and the scale of its external foundry operations.
Intel’s reported progress with its 18A manufacturing process and Tesla’s planned use of 14A are developments within its broader effort to expand advanced semiconductor production.
However, the financial contribution of these initiatives has not yet been established in the information disclosed.
Investors will continue monitoring manufacturing milestones, external customer agreements, market share trends and earnings performance to assess Intel’s progress towards its longer-term objectives.