Intel earnings lift chip stocks amid confidence The PC market slump is coming to an end.
Intel’s impressive earnings report lifts chip stocks as it beats market expectations. Positive growth signals from the tech giant have a ripple effect, boosting investor confidence and driving up the stock prices of other semiconductor companies. Market sentiment remains optimistic amid the tech sector’s resurgence.
(Reuters) – Intel shares climbed over 7% on Friday, a day after the chipmaker’s unexpectedly good quarterly report promised a turnaround in fortunes following a protracted, margin-sapping battle due to declining PC sales and a highly competitive data center sector.
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The company’s unexpected second-quarter profit and high earnings and margin expectations signaled that the personal computer market slump was coming to an end, driving a rally in its stock (INTC.O) and the broader chip industry (.SOX).
Based on its current share price of $37, Intel stands to gain nearly $10 billion in market value. That is already higher than Wall Street’s median objective of $35, according to Refinitiv, after at least 21 brokerages boosted their price targets on the company.
“Intel’s turnaround is finally happening,” Glenn O’Donnell, research director at Forrester, said. He also anticipates “far better quarters ahead for Intel and most other chipmakers.”
Intel’s results lifted Advanced Micro Devices (AMD.O) and Nvidia (NVDA.O) by 3.2% and 2.3%, respectively, while Qualcomm (QCOM.O) advanced by 2.6%.
Although a titan of the American chip industry, Intel has fallen behind rivals such as Taiwan’s TSMC and Nvidia both in terms of margins and market value as the PC market downturn and stiff competition in the data center market battered its business.
While Intel’s shares have rallied 30% this year after a tough 2022, that has paled in comparison to the more than three-fold rise in Nvidia, which became the first chipmaker with a trillion-dollar market value in May after its “historic” forecast.
However, this was largely owing to the thriving artificial intelligence (AI) sector, which Intel has missed out on due to its modest presence in graphics-processing units and other AI specialty chips that enable the technology underpinning ChatGPT.
Other chipmakers’ earnings results, including Samsung (005930. KS), have also demonstrated that the oversupply in the smartphone and PC industries is receding, but the forecast for demand from consumers outside the AI industry remains bleak.
Intel’s AI and data center businesses shrank 15% in the most recent quarter, and CEO Pat Gelsinger predicted that a server CPU surplus would last until the second part of the year.
He went on to say that Intel now has enough client orders to sell at least $1 billion in AI chips through 2024.
Nonetheless, Rosenblatt Securities analysts “do not see AI as an investable theme for Intel at the moment.”
Intel has a 12-month ahead price-to-earnings ratio of 31.10, while Nvidia has a ratio of 43.26 and the industry median is 19.95.
Aditya Soni and Chavi Mehta in Bengaluru contributed reporting, and Savio D’Souza and Shounak Dasgupta edited the piece.
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