Intel Corp. (Intel (INTC)) shares are taking a breather on Thursday, sliding 3.42% to $116.17 in premarket trading. The pullback comes after a blistering rally that pushed the stock to a record high of $132.75 earlier this week. Nasdaq futures are up 0.25% and S&P 500 futures have gained 0.31%, so the broader market is fine — this is just profit-taking after a big run.

But beneath the surface, the story is a lot more interesting. Market experts say the fundamentals are shifting in Intel's favor, and the long-term picture looks bright.

The Rise of Agentic AI

Dan Niles, founder of Niles Investment Management, argues that Intel is "still undervalued." His thesis hinges on a major shift in how AI is being deployed. We're moving beyond simple chatbots into what he calls "agentic AI" — systems that can execute complex, multi-step tasks on their own. Think of it as AI that doesn't just answer questions but actually does things.

This kind of AI requires 10 to 100 times more tokens than basic chat-based AI, Niles notes. And here's where Intel comes in: agentic AI needs an orchestration engine to organize all that data, and CPUs are the best tool for that job. The old hardware ratio of eight GPUs for every one CPU is moving toward one-to-one. That's a huge tailwind for Intel's core business.

Expansion of the Foundry Business

Intel's foundry business is also making real progress. The company recently secured a manufacturing deal with Apple Inc. (Apple (AAPL)), a move that helps Apple reduce its reliance on Taiwan Semiconductor Manufacturing Co. Ltd. (TSM). TSMC still has an edge in yields, but Intel's domestic manufacturing push is gaining traction, and that's resonating with customers who want supply chain diversification.

Niles expects Intel to lock in "pretty big foundry customers" by the end of the year, potentially including Nvidia Corp. (Nvidia (NVDA)) or Tesla Inc. (Tesla (TSLA)). If that happens, it would be a massive validation of Intel's foundry strategy.

Massive Market Forecasts

The numbers back up the optimism. Reports peg the data center CPU total addressable market at $80 billion by 2028, which is a 2.9 times increase from 2021 levels. KeyBanc analyst John Vinh notes that near-term momentum favors Intel, driven by deployments at Amazon.com Inc. (Amazon (AMZN)). That's a lot of potential revenue.

Navigating Sector Volatility

Niles is realistic about the near term. He acknowledges that semiconductor stocks are currently overbought and warns that a 15% to 20% sector correction wouldn't surprise him. But he maintains strong long-term conviction because of the explosive compute needs of the AI buildout. In other words, buckle up for some volatility, but the destination looks promising.

INTC Price Action: Intel shares were down 3.42% at $116.17 during premarket trading on Thursday, according to market data.