Intel (NASDAQ: INTC) has experienced remarkable growth in 2026, with its stock price surging 222% at the time of this report. This impressive increase is attributed to its strengthening financial performance and expanding role in the artificial intelligence (AI) chip sector.
Nonetheless, rival chip manufacturer Advanced Micro Devices (NASDAQ: AMD) presents a significant challenge to Intel’s market status. Recent data from market research firm Mercury Research (via Tom’s Hardware) indicates that Intel is losing market share to AMD in the profitable server central processing unit (CPU) sector.
AMD’s Rising Market Share Threatens Intel
Mercury Research’s findings reveal that Intel’s market share of server CPUs declined to 66.8% in the first quarter of 2026, down from 72.8% the previous year. This decline is largely due to the increasing popularity of AMD’s Epyc server CPUs, which are in high demand among hyperscalers and enterprises.
AMD CEO Lisa Su highlighted during a recent earnings call that the company achieved record server CPU revenue for the fourth consecutive quarter. Revenue saw over a 50% year-over-year increase with significant growth from both Cloud and Enterprise clients.
Su emphasized that cloud providers are increasingly opting for Epyc processors to handle AI workloads, and the company is optimistic about further market share growth due to new client acquisitions across various industries including finance, healthcare, and digital infrastructure.
Intel’s Valuation and Market Challenges
AMD’s next-gen server CPUs are anticipated to enhance its competitive edge by offering superior performance at a lower cost. Interestingly, customers are willing to pay a premium for AMD’s processors, with the company capturing 46.2% of the revenue share in the server CPU market in the first quarter, despite only holding a third of the unit share.
In contrast, Intel is facing challenges in meeting customer demand. CEO Lip-Bu Tan acknowledged during the April earnings call that “demand is outpacing supply for all our businesses, especially for Xeon server CPUs.” As AMD continues to gain ground, it seems well-positioned to leverage increased investments in AI data centers.
Outlook for Investors
Despite Intel’s impressive stock surge of 459% over the past year, concerns arise regarding its high valuation. Analysts predict a substantial earnings growth of 159% in 2026, expecting earnings per share to reach $1.09. However, Intel needs to significantly outperform market expectations, as it currently has an astonishing price-to-earnings ratio of 904.
If Intel manages to transition to a more reasonable earnings multiple of 50 times in three years, its stock could reach $112, indicating a slight downside from present levels. Investors may want to explore undervalued stocks that could benefit from the ongoing AI boom.
