NEW YORK (CNN/Money) - Intel, the world's biggest manufacturer of semiconductors and one of the tech sector's bellwethers, tightened its sales forecast for the second quarter Thursday.

The stock jumped after hours as the company indicated that it was still seeing strong demand for its core chip products that are used in many personal computers and servers.

Other chip and chip equipment companies also rallied in after-market trading, setting the stage for a potential tech stock rebound Friday following a 1.4 percent drop in the Nasdaq and 2.5 percent plunge in the Philadelphia Semiconductor Index Thursday.

The Santa Clara, Calif.-based chip maker said it now expects second-quarter sales to be $8 billion to $8.2 billion. The $8.1 billion midpoint is a shade higher than analysts' estimates of $7.98 billion, according to First Call. In April, Intel said it expected sales of $7.6 billion to $8.2 billion.

Intel also indicated that gross margins, a widely watched measure of how profitable a company is after subtracting the cost of sales, should come in at 60 percent to 61 percent for the quarter, up from its prior forecast of about 60 percent.

The company does not discuss earnings targets. Analysts are predicting earnings per share of 25 cents for the quarter, up from 14 cents a share a year ago.

Intel (INTC: Research, Estimates) stock gained nearly 1.5 percent in after-hours trading, after falling 2.1 percent to $27.41 in regular trading on Nasdaq.

The Dow component's stock more than doubled in 2003 but has slipped nearly 15 percent this year on concerns that the semiconductor cycle may be close to peaking.

But in a brief press release, Intel said that demand for its so-called architecture products, which consist of microprocessors, motherboards and chipsets, were in line with the company's expectations at the beginning of the quarter. This business accounts for the majority of Intel's sales.

The company added that demand for communications chips, mainly flash memory chips used in cell phones and other wireless devices, were stronger than expected.

"The wireless handset market is getting better so there is opportunity for Intel to see some growth," said Kevin Rottinghaus, an analyst with FTN Midwest Research. He added that this was a particularly encouraging sign since Intel had been struggling lately in the flash market as Intel rival Advanced Micro Devices gained market share.

Intel is the latest and highest profile semiconductor manufacturer to give an update about its second quarter. Earlier this week, Xilinx and Fairchild Semiconductor reaffirmed sales guidance while Altera said that its second quarter revenues should come in at the high end of its range.

Intel, like most chip companies, is expected to post strong year-over-year gains in sales, but it and other chip stocks have fallen lately because of worries about declining levels of sales growth.

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If Intel hits the $8.1 billion midpoint of its new guidance, that would be a nearly 19 percent increase from a year ago. But that's slightly less than the 20 percent growth Intel posted in the first quarter.

What's more, growth rates are expected to further slow in the third and fourth quarters largely because of tough comparisons to the strong second half of last year. Analysts currently expect third quarter sales to be up 10.5 percent from the third quarter of 2003.

In addition to worries about slowing sales growth, analysts have also expressed concerns about rising inventories at Intel causing a possible chip glut if corporate demand for computers and servers suddenly cooled.

Sales fell on a sequential basis in the first quarter, which usually happens for the company as the first half of the year is seasonally weaker. Still, first quarter inventories rose 11 percent from the fourth quarter of last year.

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During a conference call with analysts Thursday, Intel chief financial officer Andy Bryant said that inventory levels at the end of the second quarter probably would not be drastically different from the end of the first quarter.

But Cody Acree, an analyst with Legg Mason, said investors might have gone a bit overboard with their skepticism.

"Chip companies are getting ready for stronger demand in the back half of the year. There's a big difference between building a safety margin and overbuilding," said Acree. "People have been pessimistic, but we continue to get fairly firm fundamentals about the environment for PCs and semiconductors overall."

Intel's report helped boost shares of AMD (AMD: Research, Estimates) about 1.4 percent after hours. Fellow chip makers Texas Instruments (TXN: Research, Estimates) and STMicorelectronics (STM: Research, Estimates) were up slightly.

Shares of semiconductor equipment firms Applied Materials (AMAT: Research, Estimates) and Novellus Systems (NVLS: Research, Estimates) rose nearly 1 percent.

Analysts quoted in this piece do not own shares of Intel or other companies mentioned, and their firms have no investment banking ties to the companies.