Intel Under Siege: Nvidia's Server CPU Ambitions Undermine a 200% Rally

Nvidia enters Intel's server-CPU stronghold with Arm-based chips, targeting $20B revenue. Intel's stock slides amid valuation concerns and rising competition.

Intel's comeback story just got a lot more complicated. Nvidia's decision to muscle into the standalone server-CPU market — a stronghold the chip giant has long controlled — threatens to upend the narrative that has propelled Intel shares more than 200% higher this year. The move comes as Wall Street analysts are already questioning whether the rally has run ahead of fundamentals.

Nvidia’s quarterly conference call revealed plans for its own line of server processors, with a revenue target of $20 billion for the segment. AMD had pegged the addressable market at roughly $26 billion as of November 2025. If that pool doubles by 2026, Nvidia would capture nearly 40% of the market — an audacious assault on Intel’s most profitable backyard. The chips will be built on Arm architecture, which hyperscalers increasingly favour for its energy efficiency and lower cost. Counterpoint Research projects that Arm-based server CPUs could claim 90% of the AI data centre market by 2029, up from just 15% a year ago.

The timing is particularly awkward for Intel. On May 26, Northland Capital Markets downgraded the stock to Market Perform, citing valuation concerns. The bank argued that even if Intel’s data centre business grows 40% by 2027, the shares would still trade at 38 times the earnings target of $3.20 per share. Northland also dropped its price target, pointing to the risk that hyperscalers could pare back AI infrastructure spending after 2027 — a direct challenge to the central thesis behind the semiconductor rally.

Intel’s recent price action reflects the growing uncertainty. On May 28, the stock slid 3.36%, far outpacing the 0.64% decline in the broader technology-equipment sector. Competitors such as Marvell gained 1% and Nvidia held flat, suggesting that investors are growing more selective. By the end of the week, Intel shares were trading at €103.78, about 5% below their 52-week high of €109.88. The annualised volatility sits at 93% — a clear signal that conviction is fragile.

None of this is to say Intel’s operational turnaround has stalled. The company posted first-quarter 2026 revenue of $13.6 billion, up 7% year over year, with adjusted earnings of $0.29 per share. GAAP gross margin improved to 39.4% from 36.9% a year earlier. Its data-centre and AI segment alone generated more than $5 billion in revenue, a 22% increase that annualises to roughly the same $20 billion Nvidia is targeting. For the current quarter, Intel guided revenue between $13.8 billion and $14.8 billion, with an adjusted gross margin of 39% and adjusted EPS of $0.20. Operating cash flow for the first quarter came in at $1.1 billion.

Yet the very numbers that show recovery also highlight the competitive overlap. CEO Lip-Bu Tan acknowledged the shift in tone on the last earnings call: “A year ago it was about survival. Today it’s about how fast we can ramp manufacturing.” That messaging will be put to the test on June 2, when Intel executives speak at the BofA Global Technology Conference. Analysts will be looking for a credible response to Nvidia’s server-CPU push and signs that Intel’s own Foundry and data-centre ramp can outpace its rival’s market entry.

Wall Street is not yet convinced. Of the 48 analysts surveyed by S&P Global, the average rating is Hold, with a price target of $87.86 — roughly 28% below current levels. The most bullish estimate stands at $150. The stock’s short-term relative strength index of 44.6 suggests momentum is cooling. For Intel, the next round of data-centre orders and Foundry updates will be decisive. If the company can show it’s gaining ground faster than Nvidia, the valuation concerns may fade. If not, the sell-off that began with Northland’s downgrade could prove to be more than a passing correction.