Intel (INTC) Faces AI CPU Crunch As It Fills Only Half Of Demand

The Fed raised interest rates by 25 basis points, with all FOMC members voting in favor. Initially, the S&P 500 and Nasdaq showed little reaction, but later slumped. Markets recovered in the last hour, except for the Dow Jones, which fell 1.2%. Fed Chair Kevin Warsh suggested a 25 bps hike in November, less than markets expected. Tech stocks Lumentum, Coherent, Intel, and Nvidia saw gains.

Intel (INTC) can only meet about half of its processor demand, according to CEO Lip-Bu Tan. The company faces industry-wide shortages in substrates, memory, and wafers, which are limiting its supply. Intel has asked customers to prepay suppliers to secure capacity. The demand is driven by AI, with Intel's ordinary processors being crucial for orchestrating tasks. Intel's Q2 revenue was $16.1B, above guidance. The company's ability to increase shipments in Q3 is a key metric to watch.

Cognex (CGNX) will acquire RealSense, an Intel spinoff, for $600M. RealSense, which develops 3D vision tech for robots, will expand Cognex's market into robotic perception. Cognex will pay $500M in cash, with the deal expected to close in Q4. RealSense's revenue grew to $80M-$90M in 2026, up from $8M quarterly at spinout.

Intel's CEO highlighted quantum computing as complementary to traditional processors, citing error correction as an area needing advancement. IonQ demonstrated a real-time quantum error-correction decoder running on a standard CPU, showing potential for conventional computing to handle error correction. Intel shares rose 1.7% to $123.86, while IonQ gained investor attention.

Intel's RealSense, once slated for shutdown, was sold to Cognex for $600M. RealSense, spun out in 2025, tripled revenue to $80-90M. Cognex, a robotics and AI company, acquires RealSense for its 3D depth perception tech, expanding into robotics. RealSense's 180 employees, mostly in Israel, will join Cognex. Intel retains 20% stake.

Altera, in which Intel (INTC) holds a 49% stake, filed confidentially for a U.S. IPO, potentially raising over $2 billion. The move could provide a new valuation for Intel's remaining interest. AMD (AMD), which acquired Xilinx, is a key rival. Intel needs capital for its foundry expansion and turnaround efforts. Altera projects mid-20% revenue growth by 2026, but investors must assess AI-driven growth. Hedge fund interest in both Intel and AMD has increased.