June 15 (Bloomberg) -- Shares of Intel Corp., the world's largest chipmaker, rose to their highest in 18 months after Goldman, Sachs & Co. upgraded the company to ``buy'' and said it will benefit from rival Advanced Micro Devices Inc.'s likely decision to farm out production.

``Our discussions in Asia last week gave us increased confidence that Advanced Micro will move to a mostly/fully outsourced manufacturing model in 2008,'' Goldman Sachs analyst James Covello wrote in a note today. This could be ``a significant positive catalyst for Intel over the next 18-24 months,'' he wrote.

Advanced Micro has been looking for ways to pare expenses after losing sales to Intel. Last week, it said it would give more orders to Taiwan Semiconductor Manufacturing Co. to meet demand for graphics chips.

Covello said that while investors have reacted positively to signs Advanced Micro is outsourcing production, Intel may benefit by having greater control over chip supply. He said Intel could cut capital expenditures in order to deal with oversupply, leading to fewer capacity-driven declines in the market.

``We haven't changed our manufacturing plans,'' said Advanced Micro spokesman Drew Prairie.

Covello, who is based in New York, has had a ``neutral'' rating on Intel since October 16, 2006. Since then, Intel shares have gained 7.5 percent through yesterday, compared with a 10 percent rise for the Standard and Poor's 500 Semiconductors Index.

Shares of Santa Clara, California-based Intel climbed for a sixth day, rising $1.01, or 4.4 percent, to $24.24 at 4 p.m. in Nasdaq Stock Market trading. That was the highest since January 2006. Advanced Micro shares fell 15 cents to $13.63.

Covello also boosted his share-price forecast by $6, or 27 percent, to $28. He said Advanced Micro's Barcelona, a so-called quad-core processor, could be delayed until the fourth quarter, while Intel's Penryn chip may be released early.

Advanced Micro is scheduled to introduce Barcelona in the second half of this year. Quad-core processors run servers and the most expensive personal computers.

To contact the reporters on this story: Allen Wan in New York at awan3@bloomberg.net; Juho Erkheikki in Helsinki at jerkheikki@bloomberg.net.

Last Updated: June 15, 2007 16:07 EDT