Tag: Intel Corporation (INTC)

Intel's AI Ambitions: A Strategic Shift Toward Private Data Storage Solutions

Posted on by The INO.com Team

Intel Corporation (INTC), a titan in the world of semiconductors, is navigating a period of transformative change that is revolutionizing its corporate culture and product development. Traditionally, Intel’s core offerings have been microprocessors that serve as the brains of desktop PCs, laptops and tablets, and servers. These processors are silicon wafers embedded with millions or billions of transistors, each acting as binary switches that form the fundamental ‘ones and zeros’ of computer operations.

Today, the thirst for enhanced processing power is insatiable. The proliferation of Artificial Intelligence (AI), which has become integral to essential business operations across almost every sector, exponentially increases the need for robust computing capabilities. AI, particularly neural networks, necessitates enormous computing power and thrives on the collaborative efforts of multiple computing systems. The scope of these AI applications extends far beyond the PCs and servers that initially cemented INTC’s status as an industry leader.

The rapid advancement of AI has prompted Intel to rethink and innovate its chip designs and functionalities. As a result, the company is developing new software and designing interoperable chips while exploring external partnerships to accelerate its adaptation to the evolving computing environment.

Strategic Pivot Toward AI Ecosystem

At Computex 2024, INTC unveiled a series of groundbreaking AI-related announcements, showcasing the latest technologies that merge cutting-edge performance with power efficiency (especially in data centers and for AI on personal computers). The company aims to make AI cheaper and more accessible for everyone.

Intel CEO Pat Gelsinger emphasized how AI is changing the game, stating, “The magic of silicon is once again enabling exponential advancements in computing that will push the boundaries of human potential and power the global economy for years to come.”

In just six months, Intel achieved a lot, transitioning from launching 5th Gen Intel® Xeon® processors to introducing the pioneering Xeon 6 series. The company also previewed Gaudi AI accelerators, offering enterprise clients a cost-effective GenAI training and inference system. Furthermore, Intel has spearheaded the AI PC revolution by integrating Intel® Core™ Ultra processors in over 8 million devices while teasing the upcoming client architecture slated for release later this year.

These strides underscore Intel's commitment to accelerating execution and driving innovation at an unprecedented pace to democratize AI and catalyze industries.

Strategic Pricing and Availability of Its Gaudi AI Accelerators

Intel is gearing up to launch the third generation of its Gaudi AI accelerators later this year, aiming to address a backlog of around $2 billion related to AI chips. However, the company anticipates generating only about $500 million in Gaudi 3 sales in 2024, possibly due to supply constraints.

To broaden the availability of Gaudi 3 systems, Intel is expanding its network of system providers. The company is now collaborating with Asus, Foxconn, Gigabyte, Inventec, Quanta, and Wistron alongside existing partners like Dell Technologies Inc. (DELL), Hewlett Packard Enterprise Co (HPE), Lenovo Group (LNVGY), and Super Micro Computer, Inc. (SMCI), to ensure Gaudi 3 systems are available far and wide once they hit the market.

But what caught attention at Intel's announcement was the company's attractive pricing strategy. Kits featuring eight Gaudi 2 AI chips and a universal baseboard will cost $65,000, while the version with eight Gaudi 3 AI chips will be priced at $125,000. These prices are estimated to be one-third and two-thirds of the cost of comparable competitive platforms, respectively.

While undercutting Nvidia Corporation (NVDA) on price, INTC expects its chips to deliver impressive performance. According to their estimates, a cluster of 8,192 Gaudi 3 chips can train AI models up to 40% faster than NVDA's H100 chips. Additionally, Gaudi 3 offers up to double the AI inferencing performance of the H100 when running popular large language models (LLMs).

Intel Continues to Ride with 500+ Optimized Models on Core Ultra Processors

In May, INTC announced that over 500 AI models now run optimized on new Intel® Core™ Ultra processors. These processors, known for their advanced AI capabilities, immersive graphics, and optimal battery life, mark a significant milestone in Intel's AI PC transformation efforts.

This achievement stems from Intel's investments in client AI, framework optimizations, and tools like the OpenVINO™ toolkit. The 500+ AI models cover various applications, including large language models, super-resolution, object detection, and computer vision, and are available across popular industry platforms.

The Intel Core Ultra processor is the fastest-growing AI PC processor and the most robust platform for AI PC development. It supports a wide range of AI models, frameworks, and runtimes, making it ideal for AI-enhanced software features like object removal and image super-resolution. This milestone underscores Intel's commitment to advancing AI PC technology, offering users a broad range of AI-driven functionalities for enhanced computing experiences.

Robust Financial Performance and Outlook

Buoyed by solid innovation across its client, edge, and data center portfolios, the company delivered a solid financial performance, driving double-digit revenue growth in its products. Total Intel Products chalked up $11.90 billion in revenue for the first quarter of 2024 (ended March 30), resulting in a 17% year-over-year increase over the prior year’s period. Revenue from the Client Computing Group (CCG) rose 31% year-over-year.

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. Intel’s Data Center and AI (DCAI) division, which offers server chips, saw sales uptick 5% to $3.04 billion.

Also, the company reported a non-GAAP operating income of $723 million, compared to an operating loss of $294 million in the prior year’s quarter. Further, its non-GAAP net income and non-GAAP earnings per share came in at $759 million and $0.18 versus a net loss and loss per share of $169 million and $0.04, respectively, in the same quarter last year.

For the second quarter, Intel expects its revenue to come between $12.5 billion and $13.5 billion, while its non-GAAP earnings per share is expected to be $0.10.

Bottom Line

Despite vital innovations and solid financial performance, INTC’s shares have lost nearly 40% year-to-date and more than 3% over the past 12 months. However, with over 5 million AI PCs shipped since the December 2023 launch of Intel Core Ultra processors, supported by over 100 software vendors, the company expects to exceed its forecast of 40 million AI PCs by the end of 2024.

With the growing demand for AI chips, INTC could see a significant increase in Gaudi chip sales next year as customers look for cost-effective alternatives to NVDA's market-leading products. Moreover, if Intel's reasonable pricing resonates with prospective customers, the company could capture significant market share from its competitors.

Why Super Micro Computer (SMCI) Could Be a Hidden Gem for Growth Investors

Posted on by The INO.com Team

In March 2024, Super Micro Computer, Inc. (SMCI) became the latest artificial intelligence (AI) company to join the S&P 500 index, just a little more than a year after joining the S&P MidCap 400 in December 2022. Shares of SMCI jumped by more than 2,000% in the past two years, driven by robust demand for its AI computing products, which led to rapid sales growth.

Moreover, SMCI’s stock has surged nearly 205% over the past six months and more than 520% over the past year. A historic rally in the stock has pushed the company’s market cap past $48 billion.

SMCI is a leading manufacturer of IT solutions and computing products, including storage and servers tailored for enterprise and cloud data centers, purpose-built for use cases such as AI, cloud computing, big data, and 5G applications. The company has significantly benefited from the ongoing AI boom in the technology sector.

According to ResearchAndMarkets.com’s report, the global AI server market is expected to reach $50.65 billion by 2029, growing at a CAGR of 26.5% during the forecast period (2024-2029).

Specializing in servers and computer infrastructure, SMCI maintains long-term alliances with major tech companies, including Nvidia Corporation (NVDA), Intel Corporation (INTC), and Advanced Micro Devices, Inc. (AMD), which have fueled the company’s profitability and growth.

Let’s discuss Super Micro Computer’s fundamentals and growth prospects in detail:

Recent Strategic Developments

On April 9, SMCI announced its X14 server portfolio with future support for the Intel® Xeon® 6 processor with early access programs. Supermicro’s Building Block Architecture, rack plug-and-play, and liquid cooling solutions, along with the breadth of the new Intel Xeon 6 processor family, enables the delivery of optimized solutions for any workload and at any scale, offering superior performance and efficiency.

The upcoming processor family will be available with Efficient-core (E-core) SKUs rising performance-per-watt for cloud, networking, analytics, and scale-out workloads, and Performance-core (P-core) SKUs increasing performance-per-core for AI, HPC, Storage and Edge workloads. 

Also, the upcoming processor portfolio will feature built-in Intel Accelerator Engines with new support for FP16 on Intel Advanced Matrix Extensions.

In the same month, SMCI expanded its edge compute portfolio to accelerate IoT and edge AI workloads with a new generation of embedded solutions.

“We continue to expand our system product line, which now includes servers that are optimized for the edge and can handle the demanding workloads where massive amounts of data are generated,” said Charles Liang, president and CEO of SMCI.

“Our building block architecture allows us to design and deliver a wide range of AI servers that give enterprises the solutions they need, from the edge to the cloud. Our new Intel Atom-based edge systems contain up to 16GB of memory, dual 2.5 GbE LAN ports, and a NANO SIM card slot, which enables AI inferencing at the edge where most of the world's data is generated,” Liang added.

Also, on March 19, Supermicro unveiled its newest lineup aimed at accelerating the deployment of generative AI. The Supermicro SuperCluster solutions offer foundational building blocks for the present and the future large language model (LLM) infrastructure.

The full-stack SuperClusters include air- and liquid-cooled training and cloud-scale inference rack configurations with the latest NVIDIA Tensor Core GPUs, Networking, and NVIDIA AI Enterprise software.

Further, SMCI announced new AI systems for large-scale generative AI featuring NVIDIA's next-generation of data center products, such as the latest NVIDIA GB200 Grace™ Blackwell Superchip, the NVIDIA B200 Tensor Core, and B100 Tensor Core GPUs.

Supermicro is upgrading its existing NVIDIA HGX™ H100/H200 8-GPU systems for seamless integration with the NVIDIA HGX™ B100 8-GPU, thus reducing time to delivery. Also, the company strengthens its broad NVIDIA MGX™ systems range with new offerings featuring the NVIDIA GB200, including the NVIDIA GB200 NVL72, a comprehensive rack-level solution equipped with 72 NVIDIA Blackwell GPUs.

Additionally, Supermicro is introducing new systems to its portfolio, including the 4U NVIDIA HGX B200 8-GPU liquid-cooled system.

Solid Third-Quarter 2024 Results

For the third quarter that ended March 31, 2024, SMCI’s revenue increased 200.8% year-over-year to $3.85 billion. Its non-GAAP gross profit grew 163.9% from the year-ago value to $600.59 million. Its non-GAAP income from operations was $434.42 million, up 290.7% year-over-year.

The server assembler’s non-GAAP net income rose 340% from the prior year’s quarter to $411.54 million. Its non-GAAP net income per common share came in at $6.65, an increase of 308% year-over-year.

As of March 31, 2024, Super Micro Computer’s cash and cash equivalents stood at $2.12 billion, compared to $440.46 million as of June 30, 2023. The company’s total current assets were $8.06 billion versus $3.18 billion as of June 30, 2023.

Charles Liang, President and CEO of Supermicro, said, “Strong demand for AI rack scale PnP solutions, along with our team’s ability to develop innovative DLC designs, enabled us to expand our market leadership in AI infrastructure. As new solutions ramp, including fully production ready DLC, we expect to continue gaining market share.”

Raised Full-Year Revenue Outlook

SMCI expects net sales of $5.10 billion to $5.50 billion for the fourth quarter of fiscal year 2024 ending June 30, 2024. The company’s non-GAAP net income per share is anticipated to be between $7.62 and $8.42.

For the fiscal year 2024, Supermicro raised its guidance for revenues from a range of $14.30 billion to $14.70 billion to a range of $14.70 billion to $15.10 billion. Its non-GAAP net income per share is expected to be from $23.29 to $24.09.

CEO Charles Liang said he expects AI growth to remain solid for several quarters, if not years, to come. To support this rapid growth, the company had to raise capital through a secondary offering this year, Liang added.

Meanwhile, finance chief David Weigand said that the company’s supply chain continues to improve.

Bottom Line

SMCI’s fiscal 2024 third-quarter results were exceptional, with a record revenue of $3.85 billion and a non-GAAP EPS of $6.65. This year-over-year revenue growth of 200% and year-over-year non-GAAP EPS growth of 308% significantly outpaced its industry peers.

After reporting outstanding financial performance, the company raised its full-year revenue forecast as it points to solid AI demand.

Super Micro Computer, which joined the S&P 500 in March, has a unique edge among server manufacturers aiming to capitalize on the generative AI boom. Notably, the server maker’s close ties with Nvidia allow it to launch products superior to competitors, including Dell Technologies Inc. (DELL) and Hewlett Packard Enterprise Company (HPE).

The company has a history of being among the first to receive AI chips from NVDA and AMD as it assists them in checking server prototypes, giving it a head start over rivals. This has positioned SMCI as a key supplier of servers crucial for generative AI applications, leading to a remarkable 192% surge in shares so far this year.

According to an analyst at Rosenblatt Securities, Hans Mosesmann, “Super Micro has developed a model that is very, very quick to market. They usually have the widest portfolio of products when a new product comes out from Nvidia or AMD or Intel.”

Moreover, analysts at Bank of America project that SMCI’s share of the AI server market will expand to around 17% in 2026 from 10% in 2023. Argus analyst Jim Kelleher also seems bullish about SMCI. Kelleher maintained a Buy rating on SMCI’s stock.

According to the analyst, Super Micro Computer is a leading server provider for the era of generative AI. Alongside a comprehensive range of rack and blade servers for cloud, enterprise, data center, and other applications, SMCI offers GPU-based systems for deep learning, high-performance computing, and various other applications.

Given solid financials, accelerating profitability, and robust near-term growth outlook, investors could consider buying this stock for substantial gains.

Is Intel (INTC) a Buy, Sell, or Hold Amidst Tough Competition?

Posted on by The INO.com Team

Intel Corporation (INTC), a prominent semiconductor company, is currently navigating a challenging phase characterized by a dwindling financial outlook and difficulties sustaining competitiveness within the semiconductor industry. Intel stands behind many tech stocks in the S&P 500 this year, while rival chipmaker NVIDIA Corporation (NVDA) emerges as the third-best performer in the index.

Now, we will evaluate the risks and opportunities associated with investing in Intel amidst competitive pressures.

Strategic Initiatives to Keep up With the Fierce Competition

Amid escalating competition in the tech arena, INTC, the foremost producer of processors driving PCs and laptops, has aggressively expanded its presence in the AI domain to remain abreast of its peers.

Last month, the company announced the creation of the world's largest neuromorphic system, dubbed Hala Point, which is powered by Intel's Loihi 2 processor. Initially deployed at Sandia National Laboratories, this system supports research for future brain-inspired AI and addresses challenges concerning AI efficiency and sustainability.

On April 9, Intel also unveiled a new AI chip called Gaudi 3, which was intended to compete against NVDA’s dominance in popular graphics processing units. The new chip boasts over twice the power efficiency and can run AI models one-and-a-half times faster than NVDA’s H100 GPU. The company expects more than $500 million in sales from its Gaudi 3 chips in the year's second half.

In March, Reuters reported that INTC plans to spend $100 billion across four U.S. states to build and expand factories, bolstered by $19.5 billion in federal grants and loans (with an additional $25 billion in tax incentives in sight). CEO Pat Gelsinger envisions transforming vacant land near Columbus, Ohio, into "the largest AI chip manufacturing site globally" by 2027, forming the cornerstone of Intel's ambitious five-year spending plan.

Such advancements enable the company to stay competitive and meet the growing demand for AI-driven solutions across various industries.

Solid First-Quarter Performance but Shaky Outlook

For the first quarter that ended March 30, 2024, INTC’s net revenue surged 8.6% year-over-year to $12.72 billion, primarily driven by growth in its personal computing, data center, and AI business. However, its revenue from the Foundry unit amounted to $4.40 billion, down about 10% year-over-year.

Intel’s gross margin grew 30.2% from the prior year’s quarter to $5.22 billion. Also, it reported a non-GAAP operating income of $723 million, compared to an operating loss of $294 million in 2023. Further, its non-GAAP net income and non-GAAP earnings per share came in at $759 million and $0.18 versus a net loss and loss per share of $169 million and $0.04, respectively, in the same quarter last year.

The solid financial performance underscores the vital innovation across its client, edge, and data center portfolios, driving double-digit product revenue growth. Total Intel Products chalked up $11.90 billion in revenue for the first quarter of 2024, resulting in a 17% year-over-year increase over the prior year’s period. Its Client Computing Group (CCG) contributed to about 31% of the gains of this unit.

However, the company lowered its outlook for the second quarter of 2024. The company expects its revenue to come between $12.5 billion and $13.5 billion, while its non-GAAP earnings per share is expected to be $0.10.

Following the company's weak guidance for the ongoing quarter, Intel shares nosedived as much as 13% on Friday morning, overshadowing its first-quarter earnings beat. Also, the stock has plunged nearly 15% over the past six months and more than 39% year-to-date.

Bottom Line

INTC surpassed analyst estimates on the top and bottom lines in the first quarter of 2024, but achieving full recovery appears challenging. The chipmaker provided a weak outlook for the second quarter, validating concerns about its ongoing struggle to capitalize on the AI boom amid competition pressures.

Looking ahead, analysts expect INTC’s revenue to increase marginally year-over-year to $13.09 billion for the quarter ending June 2024. However, the company’s EPS for the current quarter is expected to fall 16.2% from the prior year’s period to $0.11.

For the fiscal year 2024, the consensus revenue and EPS estimates of $56.06 billion and $1.10 indicate increases of 3.4% and 5.2% year-over-year, respectively.

Recently, Goldman Sachs analysts slashed their price target for Intel stock by $5 to $34 per share and reaffirmed a ‘Sell’ rating in light of heightened competition in the artificial intelligence landscape.

Toshiya Hari noted that the company’s weak guidance was due to delayed recovery in traditional server demand, driven by cloud and enterprise customers' focus on AI infrastructure spending. As a result, it could lead INTC to lose market share to competitors like NVDA and Arm Holdings plc (ARM) in the data center computing market.

Moreover, analysts at Bank of America decreased their price target on the stock from $44 to $40, citing rising costs, slower growth prospects, and intensified competition.

Additionally, INTC’s elevated valuation exacerbates market sensitivity. In terms of forward non-GAAP P/E, the stock trades at 27.58x, 18.9% above the industry average of 23.19x. Furthermore, its forward EV/Sales of 2.93x is 5.7% higher than the industry average of 2.77x. And the stock’s forward EV/EBIT of 31.80x compares to the industry average of 19.07x.

Also, the stock’s trailing-12-month gross profit and EBIT margins of 41.49% and 1.29% are 14.7% and 73.1% lower than the industry averages of 48.64% and 4.80%, respectively. Likewise, its asset turnover ratio of negative 0.29x compares to the industry average of 0.61x.

Given this backdrop, while we wouldn’t recommend investing in INTC now, keeping a close eye on the stock seems prudent.

How Investors Can Seize Opportunities in NVDA Amid Market Volatility

Posted on by The INO.com Team

According to Todd Gordon, the founder of Inside Edge Capital, NVIDIA Corporation (NVDA) is a strong buy despite a recent pullback. The chart analyst also set a target price of $1,150 for the stock.

“I say that NVDA is just resting its legs gearing up for another move, but this time it's bringing more friends along for the run. There are quite a few different names in the semi-industry setup in a similar fashion telling me that once again the chips are ready to rip,” Gordon said.

Moreover, on March 13, Bank of America maintained its buy rating on NVDA and raised its price target from $925 to $1,100. As per BofA analyst Vivek Arya, Nvidia is expected to dominate the $90 billion accelerator market in 2024, unaffected by Google’s new CPU launch.

Last month, CNBC’s Jim Cramer suggested investors welcome an impending pullback. “I think people are right to expect a pullback here,” Cramer said. “But that’s not a reason to head for the hills. Instead, you want to raise a little cash, watch the market broaden — as it is doing — and then buy your favorite tech stocks when they come down.”

In Particular, Cramer said there may be an attractive opportunity to invest in one of his favorite stocks, NVDA. He hinted at his continued support for the tech giant over the years, even when the stock witnessed significant losses. While some on Wall Street might be growing weary of AI, Cramer emphasized that the future “runs on Nvidia.”

“If you don’t own Nvidia already, you know what? You’re about to get a sale,” he stated. “And if you do own it already, just stick with it, because it’s way too hard to swap out and then swap back in at the right level.”

Shares of NVDA have surged more than 75% year-to-date and nearly 223% over the past year. However, the stock has plunged around 3% over the past month.

Now, let’s discuss in detail factors that could influence NVDA’s performance in the near term:

Fourth-Quarter Beat on Revenue and Earnings

The chip giant reported fourth-quarter 2024 earnings that beat analysts’ expectations. For the quarter that ended January 28, 2024, NVDA’s non-GAAP revenue came in at $22.10 billion, surpassing analysts’ estimate of $20.55 billion. This compared to revenue of $6.05 billion in the same quarter of 2022.

The company posted a record revenue from the Data Center segment of $18.4 billion, up 409% from the year-ago value. NVIDIA achieved significant progress in this business segment. In collaboration with Google, NVDA launched optimizations across its data center and PC AI platforms for Gemma, Google’s groundbreaking open language models.

Further, the company expanded its partnership with Amazon Web Services (AWS) to host NVIDIA® DGX™ Cloud on AWS.

Regarding technological innovations, NVIDIA introduced several groundbreaking solutions, including NVIDIA NeMo™ Retriever. It is a generative AI microservice that enables enterprises to connect custom large language models with enterprise data, delivering highly accurate responses for various AI applications.

Additionally, NVIDIA launched NVIDIA MONAI™ cloud APIs, facilitating the seamless integration of AI into medical-imaging offerings for developers and platform providers.

The company’s Gaming revenue for the quarter was $2.90 billion, up 56% year-over-year. Talking about recent developments in the Gaming division, NVIDIA launched GeForce RTX™ 40 SUPER Series GPUs, starting at $599, featuring advanced RTX™ technologies such as DLSS 3.5 Ray Reconstruction and NVIDIA Reflex for enhanced gaming experiences.

The company also introduced microservices for the NVIDIA Avatar Cloud Engine, enabling game and application developers to integrate state-of-the-art generative AI models into non-playable characters, enhancing immersion and interactivity in virtual worlds.

NVIDIA’s non-GAAP operating income increased 563.2% year-over-year to $14.75 billion. Also, the company’s non-GAAP net income grew 490.6% from the previous year’s period to $12.84 billion. It reported non-GAAP earnings per share of $5.16, compared to the consensus estimate of $4.63, and up 486% year-over-year.

Furthermore, the company’s non-GAAP free cash flow was $11.22 billion, an increase of 546.1% from the previous year’s quarter. Its total current assets stood at $44.35 billion as of January 28, 2024, compared to $23.07 billion as of January 29, 2023.

During a call with analysts, Nvidia CEO Jensen Huang addressed investor concerns regarding the company's ability to sustain its current growth or sales levels throughout the year.

“Fundamentally, the conditions are excellent for continued growth” in 2025 and beyond, Huang told analysts. He added that the continued demand for the company’s GPUs would persist, driven by the adoption of generative AI and an industry-wide shift from central processors to Nvidia's accelerators.

For the first quarter of fiscal 2025, NVIDIA expects revenue of $24 billion. The company’s non-GAAP gross margin is expected to be 77%.

Recent Announcement of AI Chips During Nvidia GTC AI Conference

NVDA announced a new generation of AI chips and software tailored for running AI models during its developer's conference at SAP Center on March 18 in San Jose, California. This announcement underscores the chipmaker’s efforts to solidify its position as the go-to supplier for AI companies.

The new generation of AI graphics processors is named Blackwell. The first Blackwell chip is the GB200 and is anticipated to ship later this year. It will also be available as an entire server called the GB200 NVLink 2, combining 72 Blackwell GPUs and other Nvidia parts designed to train AI models. NVIDIA is enticing customers by offering more powerful chips to spur new orders.

The announcement comes as companies and software makers still scramble to get their hands on the current “Hopper” H100s and similar chips.

“Hopper is fantastic, but we need bigger GPUs,” Nvidia CEO Jensen Huang said at the company’s developer conference.

Further, the tech giant unveiled revenue-generating software called NIM, which stands for Nvidia Inference Microservices, to its Nvidia enterprise software subscription. NIM simplifies using older Nvidia GPUs for inference or running AI software and will enable companies to leverage the hundreds of millions of Nvidia GPUs they already own.

According to Nvidia executives, the company is transitioning from primarily being a mercenary chip provider to becoming more of a platform provider, like Microsoft Corporation (MSFT) or Apple Inc. (AAPL), on which other firms can build software.

Analysts at Goldman Sachs retained a buy rating of NVDA stock and raised their price target to $1,000 from $875. They expressed “renewed appreciation” for Nvidia’s innovation, customer and partner relationships, and vital role in the generative AI space after the company’s keynote.

“Based on our recent industry conversations, we expect Blackwell to be the fastest ramping product in Nvidia’s history,” the analysts said. “Nvidia has played (and will continue to play) an instrumental role in democratizing AI across many industry verticals.”

Bottom Line

NVDA surpassed Wall Street’s estimates for earnings and sales in the fourth quarter of fiscal 2023. The chipmaker has significantly benefited from the recent technology industry obsession with large AI models, which are developed on its pricey graphics processors for servers.

Moreover, sales reported in the company’s Data Center business comprise most of its revenue. NVDA’s Data Center platform is driven by diverse drivers like demand for data processing, training and inference from large cloud-service providers, GPU-specialized ones, enterprise software, and consumer internet companies.

Further, vertical industries, led by automotive, financial services, and healthcare, are now at a multibillion-dollar level.

The data center GPU market is projected to be worth more than $63 billion by 2028, growing at a staggering CAGR of 34.6% during the forecast period (2024-2028). The increasing adoption of data center GPUs in enterprises should bode well for NVDA.

Analysts expect NVDA’s revenue and EPS for the fiscal 2025 first quarter (ending April 2024) to increase 237.7% and 405.9% year-over-year to $24.29 billion and $5.51, respectively. Moreover, the company has topped consensus revenue and EPS estimates in all four trailing quarters, which is remarkable.

Furthermore, for the fiscal year ending January 2025, the company’s revenue and EPS are expected to grow 83% and 92.1% from the prior year to $111.49 billion and $24.89, respectively.

NVDA has achieved significant progress across its business divisions, and this year, it will bring new product cycles with exceptional innovations to help boost its industry forward.

Since the AI boom began in late 2022, catalyzed by OpenAI’s ChatGPT, Nvidia’s stock has been up fivefold, and its total sales have more than tripled. The company’s high-end server GPUs are essential for training and deploying large AI models. Notably, tech companies like MSFT and Meta Platforms, Inc. (META) have spent billions of dollars buying these chips.

Recently, the chipmaker announced a new generation of AI chips and software for running AI models, giving customers another reason to stick to Nvidia chips over a growing field of competitors, including Advanced Micro Devices, Inc. (AMD) and Intel Corporation (INTC).

While NVDA’s stock has declined nearly 3% over the past month, several analysts affirmed their bullish sentiment toward the stock and see a significant upside potential, owing to its booming AI business and new innovative launches to maintain its leading position in the face of rising competition.

Given these factors, investors could consider buying NVDA for potential gains.

Intel’s Stock Outlook: AI Growth vs. Regulatory Risks

Posted on by The INO.com Team

The enthusiasm surrounding artificial intelligence (AI) ever since the debut of ChatGPT in November 2022 is still in full swing, rapidly engulfing various industries. This relentless wave of innovation is reshaping the technological landscape, with tech giants racing to develop cutting-edge generative AI models to meet escalating demands.

Among the beneficiaries of this AI boom, the semiconductor industry finds itself in an enviable spot, poised to capitalize on the surging need for AI chips capable of powering generative AI models. With the AI revolution continuing to gain momentum, chip giant Intel Corporation (INTC) is strategically positioning itself to harness this wave of transformation.

Despite most of last year’s AI frenzy being indebted to NVIDIA Corporation (NVDA), thanks to its GPUs powering prominent AI models, such as ChatGPT, INTC is determined not to lag behind either.

Last year, INTC introduced Gaudi3, an AI chip tailored for generative AI software. Expected to debut this year, Gaudi3 will join the competition against NVDA’s H100, a popular option for companies constructing extensive chip farms to drive AI applications, and Advanced Micro Devices, Inc.’s (AMD) upcoming MI300X, slated to begin shipping to customers in 2024.

In addition to Gaudi3, INTC unveiled Core Ultra chips tailored for Windows laptops and PCs alongside new fifth-generation Xeon server chips. Notably, both chip variants feature a dedicated AI component known as an NPU, enhancing the capability to execute AI programs more swiftly.

This strategic move also serves as a signal to investors regarding the potential for increased demand for their chips in the AI-driven landscape.

Furthermore, in a recent move, INTC unveiled a range of new platforms, solutions, and services encompassing network and edge AI, Intel® Core™ Ultra processors, the AI PC, and beyond. This initiative aims to enhance total cost of ownership (TCO) and operational efficiency while ushering in fresh innovations and services.

In this modern era, where staying competitive necessitates embracing technological advancements, INTC is rolling out products and solutions to enable its customers, partners, and vast ecosystems to seize the emerging opportunities presented by AI and integrated automation.

With the demand for chips that fuel generative AI models soaring all across the globe, industry giants like INTC, AMD, and NVDA are engaging in fierce competition to deliver cutting-edge AI chips, surpassing escalating performance expectations.

However, the ambitious expansion plans of these major chip giants met with hurdles last year in October when the Biden administration implemented measures to restrict the types of semiconductors that American companies can sell to China.

U.S. Commerce Secretary Gina Raimondo emphasized the administration's commitment to safeguarding national security by limiting access to critical technologies, rigorously enforcing regulations, and minimizing unintended impacts on trade flows.

Nevertheless, INTC bypassed export restrictions by supplying chips worth hundreds of millions of dollars to the heavily sanctioned Chinese tech and telecom companies in Huawei. This move, which allowed INTC to furnish Huawei with chips for laptop use, has sparked criticism from its competitor, AMD.

INTC’s chip sales to Huawei notably surged between 2020 and 2023, while AMD's sales witnessed a decline.

This discrepancy arose from the United States Department of Commerce granting special permissions to select American suppliers of Huawei, including INTC, to sell specific items to the company in 2020. However, AMD's efforts to secure a license to sell similar chips under President Joe Biden's administration went unanswered.

On the other hand, despite bypassing restrictions to sell chips to Huawei, INTC experienced a decline in overall sales in China in 2023 due to the export ban. China holds significant importance for INTC, with revenue from billings to the country constituting 27% of its total sales.

Last year, INTC generated a total of $14.85 billion of its revenue in China, marking a year-over-year decline of more than 13%.

Meanwhile, both AMD and NVDA witnessed a notable decline in sales to China, surpassing that of INTC as a result of the stringent export control regulations imposed by the U.S. government.

Moreover, there is a growing likelihood that INTC could encounter comparable restrictions to those faced by AMD and NVDA. This stems from mounting pressure on President Biden to revoke the license granted by the Trump administration, permitting INTC to continue chip supplies to Huawei.

Bottom Line

With shares roughly up more than 50% over the past year, INTC has successfully capitalized on the AI tailwinds. Despite challenges, including export restrictions and intensifying competition, INTC remains committed to innovation and expansion in the AI chip market.

According to Gartner, Intel holds the top position as the largest semiconductor maker by revenue in 2023 despite having a market cap that ranks below NVDA and AMD. The company’s fourth-quarter results witnessed a 9.7% year-over-year rise in its topline figure, reaching $15.41 billion. Its net income stood at $2.67 billion versus a net loss of $664 million in the prior year’s quarter.

Pat Gelsinger, CEO of INTC, remarked that the company achieved robust fourth-quarter results, surpassing expectations for the fourth consecutive quarter, with revenue reaching the higher end of their guidance.

Furthermore, he emphasized INTC’s commitment to advancing its mission of making AI technology accessible across various sectors while generating long-term value for stakeholders.

The stock also appears quite reasonably priced compared to its industry peers. For instance, INTC’s non-GAAP price-to-earnings (P/E) ratio of 31.21x is lower than NVDA’s 35.62x and AMD’s 52.36x, respectively.

However, despite its commendable efforts and dedication to capture the global AI chip market, there is an increasing possibility that INTC may encounter similar restrictions as those faced by AMD and NVDA.

This adds uncertainty to Intel’s prospects, particularly as its competitor NVDA plans to initiate mass production of a downgraded version of its AI chips specifically designed for China in the second quarter of 2024 to comply with U.S. export regulations.

In conclusion, while INTC has made significant strides in the AI chip sector and boasts solid fundamentals, the looming regulatory challenges pose a risk to its growth trajectory. Therefore, investors could carefully monitor the stock for now and wait for a better entry point.