Intel Corp.’s upcoming earnings report could reflect recent improvements made by the company, but a Susquehanna Financial Group analyst still has questions about the chip company’s artificial-intelligence narrative.
Susquehanna’s Christopher Rolland is encouraged by “improving dynamics” in the client and Chromebook markets that could help Intel INTC, +0.38% deliver second-quarter earnings within the top half of its forecasted range and offer an outlook that may be “slightly better” than the consensus view.
“Intel may have gained some desktop and laptop share, given a more competitive lineup with Raptor Lake/Alder Lake” processors, he wrote in a note to clients Wednesday.
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Additionally, the company “may be bouncing off the bottom” in its data-center and AI business, given that its Sapphire Rapids offering is “finally” ramping up, according to Rolland.
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Though Rolland boosted his price target on Intel shares to $ 35 from $ 33 Wednesday, he maintained a neutral rating, expressing concern about the company’s positioning in the world of AI.
AI appears to be a “mixed story” for Intel, in his view. Sapphire Rapids might offer some near-term benefits, but Rolland worries that capital-expenditure budgets for central processing units (CPUs), which are Intel’s bread and butter, could come under pressure as companies look to spend more on graphics processing units (GPUs) that can help with AI tasks.
“Without meaningful hyperscale capex increases this quarter, we fear AI server GPU purchasing could crowd out wallet share for CPUs and storage product,” he wrote.
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That said, Intel faces a “lowered bar” heading into its July 27 report, Rolland added, as shares have advanced only about half as much as the PHLX Semiconductor Index SOX, +0.13% since the company last delivered results.