Northland Securities has lifted its rating on Intel (INTC.US) from "Market Perform" to "Outperform," setting a new price target of $120. This upgrade follows supply chain indications that Intel's PC CPUs are expected to see another price hike of roughly 10% on October 5, 2026. The speculation of the price increase drove Intel shares up more than 5% in pre-market trading.
Analyst Gus Richard noted that the company has made "substantial progress" in its transformation efforts. He also highlighted that Intel could continue to benefit from the ongoing server CPU shortage. Additionally, Intel's collaboration with Tesla on the Terafab semiconductor project is expected to deliver a "significant boost" to its foundry business.
According to supply chain sources, Intel's PC CPU prices are anticipated to rise by another 10% on October 5, 2026. Meanwhile, the low-margin small-core product lines may be slated for end-of-life (EOL) discontinuation. Streamlining the profit structure by cutting low-margin products is the core strategy of Intel CEO Chen Liwu in this round of adjustments. Since late 2025, Intel has been continuously raising PC CPU prices due to surging overall costs, with an increase of about 10% in Q1 2026, followed by price adjustments in July for certain consumer and server CPUs, ranging from tens to thousands of dollars per unit.
Industry institutions project global PC shipments to reach approximately 260 million units in 2026, with a slight decline to 250 million units in 2027. The primary driver is not a sharp drop in PC demand, but rather notable price increases in components like memory and PCBs, which are steadily raising overall system costs. In 2026, PC makers still hold some low-cost old inventory that can absorb the pressure from component price hikes, limiting the extent of end-product price increases. However, by 2027, products using new higher-priced components will enter mass production, amplifying PC price pressures and potentially dampening consumer upgrade intentions.
Against the backdrop of an expected slight weakening in the PC terminal market in 2027, Intel's decision to still raise CPU prices underscores that boosting gross margins is the top priority, signaling that the previous strategy of cutting prices to gain market share is no longer viable. Industry sources suggest that if Intel trims its low-margin small-core product lines, the impact may not fall on mainstream PCs, but rather on long-lifecycle markets such as industrial PCs (IPC), the Internet of Things (IoT), and embedded systems. Once this demand is released, Arm-based players like Qualcomm and MediaTek could seize the opportunity to enter, particularly in IPC, edge computing, and IoT markets, where Arm SoCs offer advantages in high integration and low power consumption.
The server CPU business presents a "trickier" challenge, with sustained capacity tightness. Recent reports indicate that compared to PC CPUs, server CPUs are Intel's more pressing concern, as the company faces a persistent shortage. Management previously forecast double-digit high growth in server CPU shipments from 2026 to 2028, with the upcycle extending through 2028. Supply chain sources point out that Intel's own fabs are prioritizing server CPU production, given the higher margins compared to TSMC-foundry output. Even so, server CPU capacity remains constrained, squeezing PC CPU production. Should Intel aim to further expand its server CPU business, it may need to outsource some orders to TSMC.
Wedbush Securities analyst Matt Bryson previously noted that the ongoing server CPU shortage grants Intel the pricing flexibility to raise prices without hurting demand. He stated that the key issue is not whether Intel can hike prices, but where the increases will be applied. Given that server chips account for a larger share of Intel's business, if broad price increases take hold, it would signify Intel regaining pricing power for the first time in years, reflecting the tight supply landscape.