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Chipmaker Intel soars on signs of PC market recovery

Photo: Intel
Photo: Intel

On Friday, shares of Intel (INTC.O.) increased by more than 9%. They spurred a spike in chip stocks after the company issued an optimistic prediction, which indicated that the personal computer industry was beginning to recover from its depression that had lasted for many quarters.

If the company’s recent advances continue, the market capitalization of the chipmaker is expected to rise by more than $10 billion. Other companies that produce chips, such as AMD (AMD.O.), Nvidia (NVDA.O.), and Arm, had gains ranging from 1% to 2%.

Bernstein analysts stated that “Intel does appear to have turned the corner on the worst of it,” referring to gains in the PC-focused business and clients it had signed for its semiconductor contract manufacturing business, among other things. “(Intel) does appear to have turned the corner on the worst of it.”

Pat Gelsinger, the CEO of Intel, is attempting to turn around the company by investing significantly in its infrastructure. The company hopes these efforts will provide it with an advantage in the production of chips and enable it to compete with companies such as Taiwan’s TSMC (2330. TW) for foundry clients.

Gelsinger told Reuters on Thursday that he anticipates finalizing a transaction for a fourth customer by the end of the year. This comes after the contract manufacturing business secured three clients who wished to remain anonymous.

“The foundry enterprise is in the process of gaining form. “The announcement of new customers is a clear positive that shows there is customer interest in what Intel brings to the table,” said Logan Purk, analyst at Edward Jones. “The announcement of new customers is a clear positive that shows customer interest in what Intel brings to the table.”

On Thursday, Intel revealed a smaller-than-feared decrease in the division that houses its PC business for July–September. As a result, the company anticipated higher-than-expected revenue and margins for the fourth quarter. These projections were made public on Thursday.

According to the data provided by LSEG, at least seventeen analysts increased their price targets on the company, which brought the consensus estimate up to $37. Although Intel’s stock price has risen by 23% in 2018, the company’s advance pales compared to the 44.6% increase seen at AMD and the nearly threefold increase seen at Nvidia.

Intel is now trading at 22.2 times its forward earnings expectations for the next 12 months, while Nvidia’s multiple is 26.06.

Stacy Rasgon, an analyst at Bernstein, stated that the “AI story still seems marginal” for Intel and that the company’s “datacenter performance continues to suffer from significant headwinds.”

Nvidia, whose visual processing units are utilized to train artificial intelligence models, is exerting a great deal of competitive pressure on the corporation in the market for chips used in data centers.

The data center business of Intel, which also houses the company’s artificial intelligence chip group, experienced a dip in sales of 10%. However, the industry has experienced a boom in demand for its “Gaudi” artificial intelligence processors.

“That is receiving a great deal of attention right now. “We are currently experiencing supply constraints on Gaudi and are working feverishly to catch up,” Gelsinger stated.

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