1 Reason Intel Stock Could Outperform in 2027
Key Points
Intel's data center revenue jumped 59% last quarter as AI boosted demand for server processors.
Management expects strong double-digit growth in server processor shipments in 2027.
Relative to expected earnings growth, Intel's valuation still looks reasonable.
Intel (NASDAQ: INTC) has been one of the market's big winners this year. The stock trades up about 170% year-to-date as of Oct. 14, 2026, compared to about 13% for the S&P 500. It could keep outperforming in 2027 for one reason: Intel's surging data center business.
Intel's data center and AI segment sells the server processors that power cloud computing and AI services. Its revenue grew 59% year over year to about $6.3 billion in the second quarter. That helped drive the company's strongest revenue growth in more than 15 years.
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Demand for AI inference applications, including agents, could drive more demand for central processing units (CPUs), which is Intel's expertise. Inference workloads are boosting orders for server CPUs, and Intel expects industry-wide server processor unit shipments to grow by strong double digits through 2027, with momentum carrying into 2028.
Intel is also bringing better products to market. It launched its first server chip, Xeon 6+, built on its new 18A manufacturing process, and 18A production is running ahead of the company's internal targets.
The stock looks expensive, trading at about 47 times next year's earnings estimates. But Intel's earnings are recovering from depressed levels and are expected to grow at an annualized rate of 69% over the next several years. Relative to expected growth, the stock trades at a PEG ratio of 0.8, which looks attractive.
Investors will get an update when Intel reports third-quarter results on Oct. 29. If the data center business continues to grow at this pace, the stock could outperform in 2027.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel. The Motley Fool has a disclosure policy.