Tag: Intel Corporation (INTC)

Chip Wars Heat Up: Why AMD (AMD) Could Challenge Intel in Data Centers

Posted on by The INO.com Team

The semiconductor landscape is witnessing a seismic shift as Advanced Micro Devices, Inc. (AMD) strengthens its presence in the lucrative data center segment. Traditionally the stronghold of Intel Corporation (INTC), this market is becoming increasingly competitive as AMD introduces cutting-edge technologies to capitalize on the rising demand for high-performance computing and artificial intelligence (AI).

In Q3 2024, AMD reported record-breaking revenue from its data center segment, thanks to a surge in demand for its EPYC CPUs and Instinct accelerators. This performance comes as global cloud providers and AI workloads require increasingly sophisticated hardware solutions. With substantial investments in AI, robust partnerships with cloud giants, and sustained innovation, AMD has positioned itself as a formidable competitor in a space long dominated by Intel.

AMD’s New Chips and Market Share Gains

AMD's recent product launches underscore its aggressive push to redefine performance standards in data centers. The EPYC 9005 Series CPUs, unveiled this year, stand out with their energy-efficient architecture, making them an attractive choice for hyperscale cloud providers. Alongside this, AMD's Instinct MI325X GPUs cater to the most demanding AI applications, combining high memory bandwidth with exceptional computational power.

Cloud providers such as Microsoft Azure and Oracle Cloud Infrastructure have expanded their use of AMD’s GPUs, demonstrating increasing confidence in AMD’s ability to meet large-scale computing needs. Oracle Corporation (ORCL), for instance, has incorporated AMD's Instinct MI300X GPUs into its Compute Supercluster, enhancing performance for AI workloads. These integrations highlight AMD's ability to provide scalable, high-performance solutions that rival Intel's long-standing Xeon lineup.

Market analysts have observed a significant shift in AMD's favor in terms of workload share within data centers. While Intel still commands a majority, AMD’s aggressive pricing, superior energy efficiency, and strategic partnerships have enabled it to claim an estimated 30% of server market workloads—an impressive leap from just a few years ago.

AMD’s Growth in AI and High-Performance Computing

AMD’s evolution into a key player in the data center market is largely tied to its strategic focus on AI. By integrating its Instinct accelerators with the ROCm open software ecosystem, AMD is becoming a popular choice for developing and deploying advanced AI models. Notably, its collaboration with Meta Platforms, Inc. (META) for the Llama 3.2 AI release reinforces AMD’s growing influence in the AI landscape.

Financially, AMD's data center segment has been the cornerstone of its impressive growth. Revenue from this segment rose 122% year-over-year in Q3 2024, contributing $3.5 billion to the company’s total quarterly revenue of $6.8 billion. This rapid growth is further supported by AMD's partnerships with industry leaders such as Alphabet Inc. (GOOGL), Dell Technologies Inc. (DELL), and Hewlett Packard Enterprise Company (HPE), which continue to incorporate its hardware into their offerings.

Additionally, AMD’s pending acquisition of ZT Systems, expected to close in 2025, is set to expand its footprint in hyperscale AI systems. This move could accelerate AMD’s development of rack-scale solutions tailored to meet the growing computational demands of enterprise and cloud environments. The company’s strategic acquisitions and partnerships underline its commitment to long-term growth in high-performance computing and AI.

Navigating Supply Chains and Industry Competition

Despite its successes, AMD faces several challenges that could temper its growth trajectory. The semiconductor industry’s reliance on advanced foundries like Taiwan Semiconductor Manufacturing Company Ltd. (TSM) presents potential supply chain bottlenecks, especially as global demand for cutting-edge chips continues to rise. Ensuring consistent access to production capacity will be critical for AMD to maintain its competitive edge.

The competitive landscape also poses significant hurdles. Intel is ramping up its innovation efforts, including the introduction of new Xeon processors with integrated AI accelerators, to defend its dominant position. Similarly, NVIDIA Corporation (NVDA), which excels in AI and GPU technologies, continues to expand its offerings, posing an additional competitive threat.

Another challenge is managing profitability amidst rising operating expenses. While AMD has successfully improved its non-GAAP gross margin to 54%, its operating expenses have also increased due to heightened R&D investments. Balancing innovation with financial efficiency will be essential for sustained success in this capital-intensive sector.

What Investors Should Consider

AMD’s growth story is compelling, particularly for investors seeking exposure to the booming AI and data center markets. Its innovative product portfolio and strong partnerships position it as a key contender to Intel’s dominance. However, given the volatility of the semiconductor industry, investors should remain cautious and consider AMD’s ability to navigate supply chain constraints and competitive pressures.

For those with a long-term perspective, AMD's strategic focus on high-performance computing and AI suggests it has the potential to outperform in the semiconductor race. As the company continues to expand its market share in data centers, investors may view AMD as a growth stock with substantial upside potential. Still, diversification remains a prudent approach to mitigate industry-specific risks.

Semiconductor Shortages Easing: Is Intel (INTC) Set for a Comeback in 2025?

Posted on by The INO.com Team

The semiconductor industry, often called the backbone of modern technology, has faced significant upheaval over the past few years. Supply chain disruptions triggered by the pandemic and skyrocketing demand from sectors like AI and electric vehicles led to what was termed "The Great Chip Shortage." However, recent developments suggest a turning tide. Supply chain stabilization and investment in manufacturing capacity are driving optimism across the industry.

Intel Corporation (INTC), a legacy giant in semiconductors, is at a critical juncture. While it has faced stiff competition from players like Advanced Micro Devices, Inc. (AMD) and NVIDIA Corporation (NVDA), it is making bold investments in product innovation and manufacturing. Could 2025 mark the start of a new era for Intel as the industry normalizes?

Market Context: The End of the Shortage?

Global semiconductor sales showed a strong recovery in the second half of 2023, reaching $527 billion. In 2024, the industry witnessed a balancing of supply and demand, with manufacturers like Taiwan Semiconductor Manufacturing Company (TSM) reporting surging profits driven by AI server processors.

The supply chain disruptions that plagued the sector are also abating. Governments have introduced measures to bolster domestic production, such as the U.S. CHIPS Act, which allocated $500 million to supply chain diversification efforts. Intel has been a significant beneficiary, securing $3 billion in government funding under the Secure Enclave program.

While AI-driven demand remains robust, segments like automotive and mobile chips have yet to recover fully. However, projections suggest a broader recovery by 2025, aligning with Intel's long-term strategy.

Intel’s Market Position: A Rebuilding Phase

Intel’s Q3 2024 financials reflect a company in transition. While revenue stood at $13.3 billion, a year-over-year decline of 6%, the company made strides in cost reduction, targeting $10 billion in savings by 2025. Its focus on innovation, particularly the Intel 18A process node, signals a push to regain process leadership. Products like Panther Lake for clients and Clearwater Forest for servers are scheduled for launch in 2025, positioning Intel to compete more aggressively.

Additionally, Intel's x86 Ecosystem Advisory Group, established with AMD and other industry leaders, aims to foster software development and hardware interoperability. Intel's new AI-focused products, such as the Xeon 6 and Core Ultra processors, highlight its ambition to dominate the AI PC category, a market it expects to ship 100 million units by 2025.

Investment Case: Growth Drivers and Tailwinds

As the chip shortage dissipates, Intel's investments in foundry capabilities and cutting-edge technology could yield substantial gains. The company’s partnership with Amazon Web Services (AWS) to develop custom Xeon chips underscores its foundry business potential.

Moreover, Intel’s government funding and alignment with global supply chain initiatives may insulate it from geopolitical risks while enabling it to scale domestic production. If Intel can capitalize on its upcoming launches, particularly in AI and advanced computing, it may capture significant market share.

However, macroeconomic conditions and evolving tech demands will play a critical role. Industry forecasts suggest global semiconductor sales may exceed $600 billion in 2024, with long-term growth driven by AI, electric vehicles, and 5G. Intel's ability to adapt to these trends will determine its trajectory.

Competition and Operational Challenges

Intel’s road to recovery is fraught with challenges. Competitors like Nvidia and AMD continue to set benchmarks in performance and innovation. Nvidia’s recent gains in AI server processors and AMD’s edge in chip architecture present formidable obstacles.

Operationally, Intel’s restructuring has been costly, with $15.9 billion in impairment charges affecting profitability. Manufacturing delays and market dynamics could further hinder the rollout of its 2025 product roadmap.

Moreover, geopolitical risks, including U.S.-China tensions, may disrupt global supply chains. As Intel aims to diversify its manufacturing footprint, these challenges remain a significant wildcard.

Investor Outlook: What Should You Do?

For investors, Intel represents a blend of risk and opportunity. The easing of the semiconductor shortage and Intel’s strategic investments suggest a potential upside. However, persistent competition and operational hurdles mean the stock may require patience.

Consider Intel if you have a long-term horizon and believe in its capacity to leverage innovation and supply chain resilience. Keep an eye on key milestones like the 2025 launch of Panther Lake and Clearwater Forest and monitor its financial health for signs of sustainable growth.

Corsair Gaming: E-Sports Boom Could Fuel This Small-Cap Stock’s Next Big Move

Posted on by The INO.com Team

The e-sports industry, once a niche market, has transformed into a global phenomenon, experiencing an extraordinary boom. The global e-sports market is projected to grow from $2.06 billion in 2024 to $9.29 billion by 2032, registering a CAGR of 20.7%.

With billions of viewers tuning in to watch competitive gaming, the sector's meteoric rise has led to an increasing demand for gaming peripherals and hardware. Brands associated with high-quality gaming equipment have been quick to seize this opportunity. Among them, Corsair Gaming, Inc. (CRSR) stands out as a key player. Known for its top-tier gaming peripherals, streaming equipment, and custom-built PCs, the company is well-positioned to capitalize on the surging demand from e-sports and gaming enthusiasts.

Corsair’s Strong Market Position in Gaming Hardware

Corsair Gaming has built a reputation as a leading provider of gaming hardware, offering a wide array of products. The company’s portfolio extends beyond gaming peripherals like keyboards, mice, and headsets; it also includes streaming gear through its Elgato brand and custom-built gaming PCs via ORIGIN PC. This product diversification gives Corsair an edge, allowing it to cater to various segments of the gaming and streaming communities.

A survey by DFC Intelligence revealed that Corsair enjoys high brand loyalty among PC enthusiasts, ranking alongside giants like Intel Corporation (INTC) and Microsoft Corporation (MSFT). This loyalty speaks to the brand's ability to deliver high-performance, durable, and innovative products—a critical factor as consumers seek equipment that enhances their gaming and streaming experiences.

Moreover, Corsair’s focus on customization, especially through its Corsair Custom Lab, offers a personalized touch that resonates well with gamers who want to tailor their gear. These offerings, along with its solid market share in peripherals and gaming components, reinforce Corsair’s market leadership.

Growth Drivers: E-Sports and Streaming Trends

One of the major catalysts for Corsair's growth lies in the expanding e-sports and game-streaming markets. The global e-sports audience is expected to surpass 640 million by 2025. As more people engage in competitive gaming and content creation, the demand for high-quality peripherals, streaming equipment, and custom PCs will continue to rise.

Corsair’s Elgato brand, specializing in streaming hardware like capture cards and microphones, has become a go-to choice for streamers. Streaming platforms such as Twitch and YouTube Gaming have seen exponential growth, and streamers are increasingly investing in premium setups to enhance their content quality. Corsair's ability to meet this demand with a range of premium products places it in a strong position to benefit from the streaming trend.

The competitive gaming world also fuels a continuous need for high-performance equipment. E-sports athletes and hardcore gamers alike seek gear that can give them a competitive edge, whether it's a responsive keyboard or a high-refresh-rate monitor. Corsair’s commitment to innovation and its recent foray into the sim-racing market further diversify its product portfolio, attracting a wider range of gaming enthusiasts.

Recent Financials: Q2 2024 Overview

Corsair’s second-quarter 2024 earnings presented a mixed picture. The company reported net revenue of $261.3 million, down 19.7% from the same period in 2023, driven by a softer self-built PC market. The Gaming Components and Systems segment, which includes memory products and custom PCs, faced a notable decline of 32.3% as consumers held off on major purchases ahead of anticipated next-gen GPU launches. However, the Gamer and Creator Peripherals segment offered a bright spot, growing by 19.6% year-over-year, continuing the strong momentum from previous quarters.

Despite these headwinds, Corsair remains optimistic. CEO Andy Paul highlighted that the current slowdown in the self-built PC market is part of a natural refresh cycle, which is expected to pick up as new hardware launches—like NVIDIA's 50-series GPUs—roll out later in 2024 and 2025. With a massive installed base of gaming hardware due for upgrades, Corsair is well-positioned to capture renewed demand in the coming years.

Moreover, the company has taken measures to manage costs, including workforce reductions and tighter control over operating expenses. These steps are aimed at improving profitability in the second half of 2024, especially as the company projects full-year revenue between $1.25 billion and $1.35 billion.

Why Investors Should Watch Corsair Gaming

Corsair Gaming's position in the growing e-sports and streaming sectors makes it a compelling stock for investors looking to gain exposure to these booming industries. Although the company faces short-term challenges, particularly in its Gaming Components division, the long-term growth prospects remain promising.

The stock has declined more than 20% over the past three months, offering long-term investors a buying opportunity. As the next wave of gaming hardware launches and the e-sports industry continues to flourish, Corsair is likely to see a rebound in its revenue streams. Moreover, its expanding product lineup in high-margin peripherals and innovative categories, like sim racing, enhances its growth potential.

Corsair’s balance sheet remains solid, with $94.6 million in cash, providing the company with the liquidity to weather near-term challenges and invest in growth opportunities. For those with a high-risk tolerance, Corsair offers a unique chance to ride the wave of e-sports and gaming growth, making it a small-cap stock worth watching closely.

Broadcom (AVGO) and Micron (MU): Top Picks for Data Center Investment Surge

Posted on by The INO.com Team

The expected record spending on infrastructure by cloud computing leaders such as Microsoft Corporation (MSFT) and Amazon.com, Inc. (AMZN) this year highlights the escalating investments in artificial intelligence (AI) data centers, a trend likely to benefit chipmakers significantly.

Bank of America (BofA) analysts forecast that cloud service provider capital expenditures will reach $121 billion in the second half of 2024, bringing the total to a record $227 billion in 2024. This figure marks a 39% increase compared to the previous year.

c, Microsoft, and Meta Platforms, Inc. (META) are predicted to more than double their spending compared to 2020 levels, while Oracle Corporation (ORCL) is expected to increase its capital expenditure nearly sixfold. The proportion of this spending allocated to data centers is already around 55% and is anticipated to rise further, reflecting the critical role of data centers in supporting advanced AI applications.

While NVIDIA Corporation (NVDA) stands out as the dominant player in the AI GPU market, BofA analysts have highlighted Broadcom Inc. (AVGO) and Micron Technology, Inc. (MU) as compelling alternatives for investors seeking to benefit from this trend.

In this article, we will delve into why Broadcom and Micron are well-positioned to capitalize on growing investments by cloud service providers in AI data centers, evaluate their financial health and recent performance, and explore the potential headwinds and tailwinds they may encounter in the near future.

Broadcom Inc. (AVGO)

Valued at a $732.45 billion market cap, Broadcom Inc. (AVGO) is a global tech leader that designs, develops, and supplies semiconductor and infrastructure software solutions. Broadcom’s extensive portfolio of semiconductor solutions, including networking chips, storage adapters, and advanced optical components, makes it a critical supplier for data centers.

Moreover, Broadcom’s leadership in networking solutions, exemplified by its Tomahawk and Trident series of Ethernet switches, positions it as a critical beneficiary of increased AI data center spending.

In May, AVGO revolutionized the data center ecosystem with its latest portfolio of highly scalable, high-performing, low-power 400G PCIe Gen 5.0 Ethernet adapters. The latest products provide an improved, open, standards-based Ethernet NIC and switching solution to address connectivity bottlenecks caused by the rapid growth in XPU bandwidth and cluster sizes in AI data centers.

Further, Broadcom’s strategic acquisitions, such as the recent purchase of VMware, Inc., enhance its data center and cloud computing capabilities. With this acquisition, AVGO will bring together its engineering-first, innovation-centric teams as it takes another significant step forward in building the world’s leading infrastructure technology company. 

Broadcom’s solid second-quarter performance was primarily driven by AI demand and VMware. AVGO’s net revenue increased 43% year-over-year to $12.49 billion in the quarter that ended May 5, 2024. That exceeded the consensus revenue estimate of $12.01 billion. Revenue from its AI products hit a record of $3.10 billion for the quarter.

AVGO reported triple-digit revenue growth in the Infrastructure Software segment to $5.29 billion as enterprises increasingly adopted the VMware software stack to build their private clouds. Its gross margin rose 27.2% year-over-year to $7.78 billion. Its non-GAAP operating income grew 32% from the year-ago value to $7.15 billion. Its adjusted EBITDA was $7.43 billion, up 30.6% year-over-year.

Further, the company’s non-GAAP net income was $5.39 billion or $10.96 per share, up 20.2% and 6.2% from the prior year’s quarter, respectively. Cash from operations of $4.58 billion for the quarter, less capital expenditures of $132 million, resulted in free cash flow of $4.45 billion, or 36% of revenue.

When it posted solid earnings for its second quarter, Broadcom announced a ten-for-one stock split, which took effect on July 12, making stock ownership more affordable and accessible to investors.

Moreover, AVGO raised its fiscal year 2024 guidance. The tech company expects full-year revenue of nearly $51 billion. Broadcom anticipates $10 billion in revenue from chips related to AI this year. Its adjusted EBITDA is expected to be approximately 61% of projected revenue.

Analysts expect AVGO’s revenue for the third quarter (ending July 2024) to grow 45.9% year-over-year to $12.95 billion. The consensus EPS estimate of $1.20 for the ongoing quarter indicates a 14% year-over-year increase. Also, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

In addition, the company’s revenue and EPS for the fiscal year ending October 2024 are expected to increase 43.6% and 12.4% from the previous year to $51.44 billion and $4.75, respectively.

AVGO’s shares have gained more than 29% over the past six months and around 74% over the past year. Moreover, the stock is up nearly 40% year-to-date.

Micron Technology, Inc. (MU)

Another chipmaker that is well-poised to benefit from significant data center spending among enterprises is Micron Technology, Inc. (MU). With a $126.70 billion market cap, MU provides cutting-edge memory and storage products globally. The company operates through four segments: Compute and Networking Business Unit; Mobile Business Unit; Embedded Business Unit; and Storage Business Unit.

Micron’s role as a leading provider of DRAM and NAND flash memory positions it to capitalize on the surging demand for high-performance memory solutions. The need for advanced memory products grows as data centers expand to support AI and machine learning workloads. The company’s innovation in memory technologies, such as the HBM2E, aligns well with the performance requirements of modern data centers.

Also, recently, MU announced sampling its next-generation GDDR7 graphics memory with the industry’s highest bit density. The best-in-class capabilities of Micro GDDR7 will optimize AI, gaming, and high-performance computing workloads. Notably, Micron reached an industry milestone as the first to validate and ship 128GB DDR5 32Gb server DRAM to address the increasing demands for rigorous speed and capacity of memory-intensive Gen AI applications.

Further, MU’s strategic partnerships with leading tech companies like Nvidia and Intel Corporation (INTC) position the chipmaker at the forefront of technology advancements. In February, Micron started mass production of its HBM2E solution for use in Nvidia’s latest AI chip. Micron’s 24GB 8H HBM3E will be part of NVIDIA H200 Tensor Core GPUs, expected to begin shipping in the second quarter.

For the third quarter, which ended May 30, 2024, MU posted revenue of $6.81 billion, surpassing analysts’ expectations of $6.67 billion. That compared to $5.82 billion in the prior quarter and $3.75 billion for the same period last year. Moreover, AI demand drove 50% sequential data center revenue growth and record-high data center revenue mix.

MU’s non-GAAP gross margin was $1.92 billion, versus $1.16 million in the prior quarter and negative $603 million for the previous year’s quarter. Its non-GAAP operating income came in at $941 million, compared to $204 million in the prior quarter and negative $1.47 billion for the same period in 2023.

Additionally, the chip company reported non-GAAP net income and earnings per share of $702 million and $0.62 for the third quarter, compared to non-GAAP net loss and loss per share of $1.57 billion and $1.43 a year ago, respectively. Its EPS beat the consensus estimate of $0.53. Its adjusted free cash flow was $425 million during the quarter, compared to a negative $1.36 billion in the prior year’s quarter.

For the fourth quarter of fiscal 2024, Micron expects non-GAAP revenue of $7.60 million ± $200 million, and its gross margin is anticipated to be 34.5% ± 1%. Also, the company expects its non-GAAP earnings per share to be $1.08 ± 0.08.

Analysts expect AVGO’s revenue for the fourth quarter (ending August 2024) to increase 91.4% year-over-year to $7.68 billion. The company is expected to report an EPS of $1.14 for the current quarter, compared to a loss per share of $1.07 in the prior year’s quarter. Further, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

MU’s shares have surged over 30% over the past six months and approximately 75% over the past year.

Bottom Line

The substantial surge in capital expenditures by cloud computing giants like Microsoft, Amazon, and Alphabet highlights the importance of AI and data centers in the tech industry’s landscape. Broadcom and Micron emerge as two of the most promising chip stocks for investors seeking to benefit from this trend. Both companies offer solid financial health, significant market positions, and exposure to the expanding data center and AI markets.

While Broadcom’s diverse semiconductor solutions and Micron’s leadership in memory technology make them attractive investment opportunities, investors must remain mindful of potential headwinds, including market competition and geopolitical risks. By evaluating these factors and understanding the growth potential of these companies, investors can make informed decisions in the rapidly evolving technology sector.

Is Intel a Buy? Deep Dive into Software Expansion and AI Aspirations

Posted on by The INO.com Team

Intel Corporation (INTC), a global leader in designing and manufacturing semiconductor products, is making headlines with its ambitious goals for software expansion. Chief Technology Officer (CTO) Greg Lavender told Reuters that Intel’s push into software is progressing well, with the company potentially achieving cumulative software revenue of $1 billion by the end of 2027.

Progress in Building a Software Business

INTC has been steadily growing its software capabilities. The company generated over $100 million in software revenue in 2021, the year Greg Lavender was brought in from cloud computing firm VMware, Inc. (VMW) by CEO Pat Gelsinger to lead Intel’s software strategy. Since then, the chipmaker has acquired three software companies. It highlights Intel’s strategic pivot towards becoming a significant player in the software market, complementing its traditional hardware dominance.

Intel, which reported $54 billion in revenue in 2023, offers a variety of software services and tools, ranging from cloud computing to artificial intelligence (AI). Lavender stated that his strategy is centered on providing services in AI, performance, and security, with the company making significant investments in all three areas.

The chipmaker's investment in AI is particularly noteworthy. INTC’s upcoming Gaudi 3 chip is expected to generate significant demand, potentially positioning the company as a major contender in the AI chip market. Intel said it expected over $500 million in sales from its Gaudi 3 chips in the second half of the year.

Powered by the high-efficiency Intel® Gaudi® platform and boasting proven MLPerf benchmark performance, Intel® Gaudi® 3 AI accelerators are designed to tackle demanding training and inference tasks. Recently, Intel announced pricing for Intel® Gaudi® 2 and Intel® Gaudi® 3 AI accelerator kits, which redefine power, performance, and affordability.

A standard AI kit, including Intel Gaudi 2 accelerators with a universal baseboard (UBB), is offered to system providers at $65,000, estimated to be one-third the cost of comparable competitive platforms. Also, a kit including eight Intel Gaudi 3 accelerators with a UBB will cost $125,000, expected to be two-thirds the cost of comparable competitive platforms.

NVIDIA Corporation (NVDA) currently dominates this space, controlling about 83% of the data center chip market in 2023. However, INTC’s focus on developing versatile and efficient AI processors could challenge NVDA’s dominance.

Positioning as a Leader in the Tech Industry

Intel’s comprehensive approach to AI software development could significantly enhance its position in the technology industry. CTO Greg Lavender mentioned that Intel is backing open-source initiatives to create software and tools capable of powering a diverse array of AI chips, with further breakthroughs anticipated in the upcoming months.

A crucial part of NVDA’s success is attributed to its proprietary software, CUDA, which binds developers to Nvidia chips. However, France’s antitrust regulator is preparing to charge Nvidia with suspected anti-competitive practices. The regulatory body voiced concerns about the generative AI sector’s reliance on CUDA.

Intel is a part of the UXL Foundation, a consortium of technology companies working on an open-source project that aims to make computer code run on any machine, regardless of the underlying chip and hardware. Other notable members of this consortium include Qualcomm Inc (QCOM), Samsung Electronics, and Arm Holdings plc (ARM).

Furthermore, INTC is actively contributing to Triton, an initiative led by OpenAI to develop an open-source programming language designed to improve code efficiency across AI chips. This project is also supported by Advanced Micro Devices, Inc. (AMD) and Meta Platforms, Inc. (META). Triton is already operational on Intel’s existing graphics processing units and will be compatible with the company's next generation of AI chips.

“Triton is going to level the playing field,” Lavender said, emphasizing the potential impact of this initiative.

By contributing to open-source projects like Triton and the UXL Foundation, Intel aims to create a more inclusive and competitive AI ecosystem. This strategy boosts INTC’s technological capabilities and strengthens its reputation as a forward-thinking company willing to invest in the broader tech community.

Robust First-Quarter Performance but Weak Second-Quarter Forecast

For the first quarter that ended March 30, 2024, INTC’s net revenue increased 8.6% year-over-year to $12.72 billion, primarily driven by growth in its personal computing, data center, and AI business. Revenue from the company’s biggest business, Client Computing Group (CCG), which is responsible for chips for PCs and laptops, grew 31% year-over-year to $7.50 billion.

Intel’s Data Center and AI business, which makes central processors for servers and other parts and software, reported sales of $3 billion, up 5% year-over-year. The company continues to compete for server market share against well-established chipmakers like Nvidia.

Further, the company’s gross margin rose 30.2% from the prior year’s quarter to $5.22 billion. INTC’s non-GAAP operating income came in at $723 million, compared to an operating loss of $294 million in the previous year’s quarter. Its non-GAAP net income and earnings per share were $759 million and $0.18, compared to a net loss and loss per share of $169 million and $0.04, respectively, in the same period of 2023.

The chipmaker gave weak guidance for the second quarter. For the quarter that ended June 2024, Intel expects its revenue to come between $12.50 billion and $13.50 billion, and its non-GAAP earnings per share is anticipated to be $0.10.

Meanwhile, analysts expect INTC’s revenue for the second quarter to increase marginally year-over-year to $12.99 billion. The company’s EPS is expected to decline 21.6% year-over-year to $0.10 for the same period.

Bottom Line

Intel’s strategic shift towards expanding its software capabilities, primarily focusing on AI and cybersecurity, is setting the stage for substantial future revenue growth. The company’s progress in building a robust software business, evidenced by the significant revenue surge and strategic acquisitions over the years, highlights a promising growth trajectory.

By focusing on AI, performance, and security areas and making significant investments, Intel is diversifying its revenue streams and positioning itself as a formidable player in the tech industry. The company’s executives hinted at robust demand for its upcoming Gaudi 3 chip, which can help Intel take second place in the AI chip market.

While INTC’s involvement in open-source initiatives like Triton and the UXL Foundation, collaboration with industry leaders, and continuous innovation underscores its commitment to fostering a competitive and inclusive AI ecosystem, Nvidia’s dominance in the data center chip market is pronounced and presents a significant challenge.

Intel’s solid first-quarter performance reflects the effectiveness of its strategic initiatives, but its dim second-quarter guidance indicates some short-term challenges. Analysts predict a slight year-over-year revenue increase but a notable EPS decline for the second quarter. While it may face hurdles in the immediate future, INTC’s long-term prospects appear promising, driven by its software expansion and strategic investments in AI.

Cantor Fitzgerald reiterated a Neutral rating on INTC stock while maintaining a price target of $40. Also, TD Cowen reiterated coverage on Intel with a Neutral rating and set a new price target of $40 from $45 previously. Given this backdrop, it seems wise to wait for a better entry point in INTC now.