Intel shares were gaining early Friday as investors digested its second-quarter earnings. Wall Street analysts welcomed signs of recovering demand for the chip maker but expressed caution about competitive challenges from
Nvidia
and Advanced Micro Devices.
Intel’s
(ticker: INTC) stronger-than-expected revenue forecast lead analysts at Melius Research to believe there could be a recovery in both personal computers and data centers.
The trend in data centers is particularly important as
Nvidia
(NVDA) is growing rapidly in the sector, powered by demand for its graphics-processing units, or GPUs. Nvidia’s GPUs have become the leading choice for powering servers supporting artificial intelligence, potentially displacing Intel’s central-processing units, or CPUs.
“While Intel acknowledged the trend that GPUs were cannibalizing CPU spend, the trend seems manageable,” Melius’s Ben Reitzes wrote “Despite near-term weakness, we believe [Intel’s] Data Center and Client revenue will see a “halo effect” from AI in 2024.”
Reitzes reiterated a Buy rating and $43 target price for Intel. The stock was up 7.1% in premarket trading to $37.00.
However, Nvidia isn’t the only competitor looking to take on Intel, which also faces a challenge in the data-center market from
AMD
(AMD). AMD is launching its own AI chips and its stock has risen sharply this year. Analysts at
Oppenheimer
said they were cautious on Intel in the face of competition from AMD and the prospects for personal computer spending.
“We remain constructive on the data center outlook for now but remain cautious of PC unit growth and associated revenue growth,” Oppenheimer’s Rick Schafer wrote.
Schafer kept a Perform rating on Intel shares with no target price.
Write to Adam Clark at [email protected]
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