Investing.com -- HSBC upgraded Intel Corp to Buy from Hold on Tuesday, setting a Street-high price target of $95, up from $50, arguing that upside from the chipmaker’s core CPU business is not yet priced in the stock.

Intel shares have surged roughly 60% since April 1, driven chiefly by two announcements – the company’s repurchase of a 49% equity interest in its Ireland fab joint venture and its decision to join the Terafab project alongside SpaceX, Tesla, and xAI as a foundry partner.

“Though we agree these announcements paint a much more positive picture of Intel’s overall financial position as well as its foundry outlook, we believe the market is still overlooking a key element – the server CPU-led growth opportunity,” HSBC analyst Frank Lee said in a note.

He expects this to become the primary driver of near-term earnings, with consensus estimates on Intel’s Data Center and AI (DCAI) segment notably underestimating the potential.

Lee’s views focus on Intel’s decision to reallocate internal manufacturing capacity on its Intel 3 and 7 nodes away from PC processors and toward server CPUs, a move management flagged during the fourth-quarter 2025 earnings call in response to "unexpectedly high" surge in demand for high-end Xeon processors.

Lee expects this reallocation to drive server CPU shipment growth of 20% year-on-year in both 2026 and 2027.

In a supply-constrained environment, the analyst also anticipates Intel will raise average selling prices (ASPs) by 20% in 2026 and a further 10% in 2027, with the combination lifting gross margins well above current consensus levels.

HSBC’s 2026 and 2027 DCAI revenue estimates of $22.8 billion and $29.1 billion sit 16% and 33% above the Street, respectively.

Even in a bear case scenario — assuming only 10% server CPU shipment growth in 2027 — the bank’s sensitivity analysis implies around 38% upside to Intel’s current share price.

On valuation, HSBC used a sum-of-the-parts (SOTP) approach based on a 26x target PE multiple applied to its 2027 core business earnings estimate, deliberately excluding the foundry segment given continued uncertainty around external customers.

“Foundry-related deals drive a c60% share price rally, but the significant server CPU momentum is still not priced in,” the note says.