Surging demand for Intel Corp. (INTC) data-center chips has not erased the problems weighing on the rest of the company. JPMorgan sees limited upside at recent levels, with a price target that implied another 13% decline before Intel's third-quarter earnings-driven selloff.

Intel's AI Growth Has a Catch

Intel's Data Center and AI (DCAI) business generated $7.3 billion in third-quarter revenue, up 78% from a year earlier, its strongest growth in 15 years. The segment is benefiting from demand for Xeon server CPUs and custom chips as companies expand AI infrastructure.

Yet the momentum has exposed another constraint: Intel cannot make enough chips to fully capitalize on demand. Management has identified supply as a key limitation, with relief not expected until the second half of 2027.

Its ASIC business, which develops custom chips for customers, has more than doubled year over year to an estimated $2.8 billion annualized run rate, according to JPMorgan analyst Harlan Sur.

But AI growth is not enough to offset weakness elsewhere.

PC Weakness Is Getting Worse

Intel's Client Computing and Physical AI Group brought in $8.1 billion, down 5% year over year. Intel expects the PC slowdown to persist through the first half of 2027. Its fourth-quarter revenue guidance of $15 billion to $16 billion also fell short of Wall Street's roughly $17.1 billion estimate.

A factory disruption in Israel is adding to the pressure. Intel said the incident could reduce fourth-quarter revenue by about $300 million and weigh on gross margin by roughly 200 basis points. The company expects a similar revenue impact in the first quarter.

AI demand is accelerating, but PC weakness and capacity limits complicate the recovery.

Intel's Turnaround Still Needs Cash

Sur lowered his December 2027 price target to $80 from $85, maintaining a Neutral rating. Against Intel's Oct. 29 regular-session close of $92.07, that implied roughly 13% downside. The comparison predates the sharp after-hours drop triggered by the earnings outlook.

Intel also guided to a 38% gross margin for the fourth quarter and expects capital spending to rise significantly in 2027 from its $20 billion 2026 baseline. JPMorgan expects that investment to pressure free cash flow.

Intel's third-quarter results show revenue rose 21% to $16.5 billion. DCAI climbed 78%. But investors are being asked to fund a costly manufacturing comeback while the PC business weakens and supply constraints limit the upside from server demand.

Until Intel can turn that demand into sustained cash generation, its AI growth alone may not be enough to support the stock's valuation.