The shares of Intel Corp. had the worst day of the year on Friday, according to an earnings report that exceeded expectations but showed worrying declines in data center sales.
The stock fell to $ 57.90 on Friday morning at 11 a.m. Eastern Time, 7.5% lower than Thursday’s closing price and on its way to the worst day since October. The chip manufacturer is between Thursday and Friday published first quarter results that slightly exceeded expectations overall but showed weakness in perhaps the most important segment at the moment: the sale of data centers.
Intel’s server chip sales were down more than 20% year-over-year due to the lack of estimates as data center sales increased in importance given the surge in cloud computing and artificial intelligence-level workloads that require massive computing power. Intel’s management attributed the decline to harsh comparisons with last year’s total, as well as the “digestion” of the major cloud providers, meaning they had already bought enough chips and were waiting to buy more.
Analysts added another reason Intel didn’t mention: competition. The rise of Advanced Micro Devices Inc.
AMD + 4.68%
as a real competitor in the server business and expected profits for Arm Holdings PLC.
“Unspecified, we believe this is partly due to the loss of shares by AMD in general and the internal ARM design at select customers,” wrote Cowen analysts, while maintaining an outperform rating and a price target of $ 80 .
“We attribute this at least partially to the competitive pressure from AMD,” write Oppenheimer analysts with a perform rating for the share. “Intel is defending its lawn.”
“We believe that the loss of market share and the associated price pressure is very likely to be contributing to the sharp decline in sales and profitability at DCG. Investors will find out next week when AMD reports,” argued Needham analysts during a review Maintain underperform rating.
AMD stock rose as much as 5% in morning trading, and Nvidia Corp.
NVDA, + 2.79%
– Which tries to acquire arm and plans its own server CPUs based on Arm’s technology – increased by approx. 2%. While it will take a few years for the recently announced server CPU from Nvidia to hit the market, analysts have expected good competition for the x86 standard that Intel and AMD use for server chips.
Full income coverage: Intel stock falls despite declining earnings as data center revenue falls more than 20%
“Our in-depth insights into companies that have ported software from Intel x86 to Graviton (ARM server CPU) have seen price improvements of 40% to 50%,” wrote Jefferies analysts while maintaining a hold rating and price target of $ 59 retained.
“We estimate that Intel’s data center revenue share has fallen from 98% to 68% over the past 5 years as Nvidia and AMD have gained their share,” added the Jefferies analysts. “We believe Intel’s stock loss will accelerate as ARM CPUs join Nvidia and AMD as data center stock winners.”
One possible selling point is availability. Mizuho analysts reported that the lead time for customers ordering Intel’s Ice Lake server chips was around 1 week, while customers buying AMD’s chips for Milan and Rome waited three months or more.
The new Intel boss Pat Gelsinger promised on Thursday afternoon to fight for market share in the server category without mentioning exactly who he wanted to fight, and further laid out his plans to increase sales and earnings. Analysts believe that his However, plans may have varying degrees of success mean that Intel will be spending large amounts in the short term and results will be longer term.
“Intel faces a very challenging 2-3 years in terms of stock loss, margin pressure and increased execution risk by juggling many more balls in the air than ever before,” wrote Hans Mosesmann, an analyst at Rosenblatt Securities, a sell-rated Intel bear and $ 40 target price.
“Increased costs are substantial and early; The benefits will be very forward-looking and profitability will weigh on the company’s margins, ”wrote Truist analysts as they lowered their price target from $ 73 to $ 69.
At least four analysts have lowered their target price on the stock in response to earnings, although none of them changed their rating on the stock. A total of 17 out of 36 analysts who deal with Intel rate the share as a buy equivalent according to the FactSet tables. Hold 12 rate shares and 3 call them a sale.