A spike in Intel's short interest

Shares sold short in Intel Corp. (NASDAQ: INTC) in June rose 23% to 100.1 million. The world's largest chip company's shares are up 30% this year, while those of its rival Advanced Micro Devices Inc. (NYSE: AMD) are off over 40%.

Intel has clearly been taking back market share from AMD in both the server and PC markets. Mercury Research reported that Intel's piece of the market rose to over 80% in Q1 compared to 74% in the previous quarter. The analysis shows that some of the gain was because AMD had to dump chips in Q4 2006 to cut down inventories, making its numbers in that quarter unusually high.

Analysts believe that Intel's piece of the x86 customer base will stay above 80% after years of AMD chipping away at its numbers. AMD has had to drop prices to keep up as Intel has introduced its new Core 2 Duo products.

But Wall St. sense that momentum could swing the other way as AMD brings out its new Barcelona chip. Early figures on the performance of the chip put it ahead of Intel's comparable products in computing capacity and power consumption. Sun Microsystems Inc. (NASDAQ: SUNW) recently picked the new quad-core chip for its new supercomputer, passing over the competing Intel product.

If Barcelona is a hit, Intel's shares could move back down.

Douglas A. McIntyre is a partner at 24/7 Wall St.