Nomura Instinet upgraded Intel shares to buy from neutral, saying Monday the company is the only chip stock which will raise estimates in October and November.
"We believe that Intel will remain supply constrained until the ramp [in production] of 10nm," Nomura's Romit Shah said in a note.
Intel is working to mass produce its 10-nanometer chip (10nm) after years of delays. One nanometer is equal to one-billionth of a meter. Historically, smaller nanometer technologies have allowed companies to create faster, more power-efficient chips.
Intel has fallen behind Samsung, which is already manufacturing 10nm chips. Despite the delays, Nomura sees Intel beginning to ramp 10nm production.
"Every U.S. and foreign-based equipment supplier we've spoken with recently is seeing 10nm volumes become more meaningful," Shah said.
Shah also noted that interim Intel CEO Bob Swan is prioritizing Intel's production of its Xeon and Core processors. Shah said those processors "serve the high-performance segments," which "bodes well for earnings and specifically gross margin."
Nomura maintained its Intel price target of $50 a share. Intel shares rose 1.8 percent in premarket trading from Friday's close of $44 a share.
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