Introduction
Intel Corp.’s upcoming earnings report is anticipated to reflect recent improvements made by the company. Analyst Christopher Rolland from Susquehanna Financial Group acknowledges these positive developments but still harbors concerns about the chip company’s artificial-intelligence narrative.
Encouraging Market Dynamics
Rolland is encouraged by the “improving dynamics” in the client and Chromebook markets, which could contribute to Intel delivering second-quarter earnings that fall within the top half of its forecasted range. Moreover, he believes Intel may offer an outlook that is slightly better than the consensus view. Rolland attributes this potential success to Intel’s more competitive lineup with Raptor Lake/Alder Lake processors, which may have helped the company gain desktop and laptop share.
Data Center and AI Business Outlook
Rolland suggests that Intel’s data-center and AI business might be bouncing back as their Sapphire Rapids offering ramps up. This optimistic viewpoint is tempered by his concerns about Intel’s positioning in the world of AI. While Sapphire Rapids may provide some near-term benefits, Rolland worries that companies’ increased expenditure on graphics processing units (GPUs) for AI tasks could put pressure on Intel’s central processing unit (CPU) capital-expenditure budgets.
Neutral Rating and Price Target
Despite raising his price target on Intel shares to $35 from $33, Rolland maintains a neutral rating. His reservations stem from the mixed story surrounding AI at Intel. While AI holds potential, Rolland questions whether increased investment in GPUs for AI purposes could overshadow spending on CPUs and storage products.
A Lowered Bar for Intel
Rolland notes that Intel faces a “lowered bar” when it comes to market expectations leading up to its July 27 report. This is due to the fact that Intel’s shares have advanced only about half as much as the PHLX Semiconductor Index since the company’s last earnings announcement.