Chip Industry’s Silver Lining: Intel’s Stellar Performance Fuels Optimism A fresh breeze of optimism sweeps the chip industry as Intel shares catapulted by 7% on Friday. This unexpected surge followed the chip giant’s surprisingly robust quarterly report, hinting at a possible end to its protracted, margin-draining battle with falling PC sales and the fiercely competitive data center market.
Riding the wave of these promising indications, Intel is set to append approximately $10 billion to its market value, edging towards a premarket price of $37. Notably, this value already surpasses Wall Street’s median target by 6%, triggering at least 17 brokerages to revise their price targets on the stock upward.
According to Glenn O’Donnell, Research Director at Forrester, “Intel’s turnaround is finally happening.” O’Donnell’s outlook predicts brighter quarters for Intel and most other chipmakers. His optimistic view fueled the surge in Intel’s stock and ignited a broader rally in the chip sector.
Advanced Micro Devices (AMD) and Nvidia, industry leaders in their own right, saw a rise of 2.3% and 1.5%, respectively. Likewise, Qualcomm marked an ascent of 1.5%.
Once considered an American titan in the chip industry, Intel has grappled with headwinds from market leaders such as Taiwan’s TSMC and Nvidia. This fierce competition, combined with the declining PC market, weighed heavily on its margins and market value.
While Intel’s shares rallied 30% this year following a challenging 2022, it falls short in comparison to Nvidia’s more than three-fold rise. Nvidia hit the jackpot in May with a “historic” forecast, becoming the first chipmaker to reach a trillion-dollar market value.
This remarkable growth in Nvidia’s value can be attributed to the booming artificial intelligence (AI) market. However, Intel’s minimal footprint in graphics-processing units and other AI specialist chips have led to a reduced impact on this thriving market.
Despite this, Intel has secured enough customer orders to sell at least $1 billion worth of its AI chips through 2024, according to CEO Pat Gelsinger.
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Intel’s AI and data centers business contracted 15% in the recent quarter. Analysts at Rosenblatt Securities assert they “don’t see AI as an investable theme for Intel currently.” Notwithstanding, Intel’s 12-month forward price-to-earnings ratio stands at 31.10, comparing favorably to Nvidia’s 43.26 and an industry median of 19.95.