Intel, one of the leading chip makers, recently held its annual technology conference. However, the conference did not yield the results the company had hoped for, as its shares experienced a drop. Analysts are expressing doubts about Intel’s ability to compete with Nvidia in artificial intelligence, protect its core market, and simultaneously strengthen its semiconductor-manufacturing business.
Struggles in AI and Gross Margins
As part of the conference, Intel made several announcements regarding advancements in AI chips, which were well-received by the technology community. However, Wall Street analysts showed concerns after the company made comments that tempered expectations for improvements in its gross margins.
According to Oppenheimer analyst Rick Schafer, Intel’s projected gross margin for 2024 is expected to be in the low-to-mid 40 percentage range. This falls short of the company’s long-term target of 60%. Schafer has given Intel stock a Perform rating with no target price.
Prove-it Mode and Turnaround Efforts
In his assessment, Schafer acknowledges Intel’s efforts to regain process leadership and establish a foundry business. However, he believes that the company is still in a “prove-it mode” as it navigates through multiyear turnaround efforts. Due to this cautious view, Oppenheimer remains on the sidelines with regards to Intel.
Stock Performance and Future Outlook
Following the announcement, Intel’s stock experienced a 4.3% decline the previous day. However, it saw a slight increase of 0.3% in premarket trading on Wednesday.
As Intel strives to address these challenges and meet its ambitious goals, it remains to be seen whether the company can successfully overcome its obstacles and regain its competitive edge in the ever-evolving tech industry.
Intel Faces Challenges in a Competitive Market
Intel, one of the leading chip manufacturers, recently experienced a drop in stock prices. This decline can be attributed to comments made by Intel executives regarding gross margins. Matt Bryson from Wedbush noted that the company’s cautious outlook was justified as they navigate the introduction of several new products. Bryson, who has a Neutral rating on Intel stock, has set a target price of $35.
There are several challenges that Intel currently faces. One of these is the advancement of Nvidia in the AI sector within the data-center market. Additionally, Intel aims to expand its chip manufacturing capabilities to compete with Taiwan Semiconductor Manufacturing. Furthermore, Intel must also protect its core central-processing unit business.
Despite these challenges, Intel executives have managed to reassure some investors. Srini Pajjuri from Raymond James believes that the slower expansion of gross margins is primarily due to cyclical factors, and he remains confident that the company will achieve its long-term targets.
Pajjuri stated, “We are maintaining our estimates for now and reiterating our Outperform rating. We believe that positive structural factors such as improved execution, reduced market share losses, progress in the foundry sector, and long-term AI opportunities will outweigh temporary margin challenges.”
Overall, while Intel faces obstacles in a highly competitive market, its strategic initiatives and future prospects position it well for long-term success.