Friday saw a spike in chip stocks as Intel (INTC.O.) surged more than 9%, signaling that the personal computer industry was beginning to recover from a quarter-long decline.
If advances continue, the chipmaker’s market value may rise by almost $10 billion. Other semiconductor companies had 1% to 2% increases, including AMD (AMD.O), Nvidia (NVDA.O), and Arm.
Analysts at Bernstein stated that “Intel does appear to have turned the corner on the worst of it,” citing the company’s gain in the PC-focused division and the clients it had signed up for its chip contract manufacturing business. Intel is attempting to turn around its business under CEO Pat Gelsinger by investing heavily in infrastructure, which the company believes will give it an advantage in chipmaking and enable it to compete with companies like Taiwan’s TSMC (2330. TW) for foundry clients.
For the contract manufacturing operation, Gelsinger has secured three unidentified clients. He told Reuters on Thursday that he anticipates closing a deal with a fourth customer before the year ends.
“The foundry industry is beginning to take shape. Edward Jones analyst Logan Purk said, “The announcement of new customers is a clear positive that shows there is customer interest in what Intel brings to the table.”
Additionally, Intel predicted higher-than-expected sales and margins for the fourth quarter on Thursday after the company announced a less severe-than-expected decrease in the division that houses its PC business for July–September.
LSEG data shows that a minimum of 17 analysts increased their price targets for the company, pushing the median estimate up to $37. Although Intel has risen by 23% this year, its gains have been insignificant compared to AMD’s 44.6% gain and Nvidia’s nearly three-fold increase. Unlike Nvidia, which trades at 26.06 times its 12-month forward profit expectations, Intel sells at 22.2 times.
The “AI story still seems marginal” for Intel, according to Bernstein analyst Stacy Rasgon, and “data center performance continues to suffer from significant headwinds”. Nvidia, a competitor in the data center processor business, is putting a lot of pressure on the firm since its GPUs are used to train AI models.
10% less sales were made at Intel’s data center division, which also houses its AI chip division. However, the business has noticed a spike in demand for its “Gaudi” AI processors.
“A lot of people are interested in that. We’re rushing to catch up to Gaudi’s supply constraints,” Gelsinger stated.
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