Intel feeling chipper about PC comeback
The semiconductor giant's stock is rallying following strong earnings. But Intel shares are still lagging the rally for Nvidia, AMD and the broader chip sector this year.
Cue the Intel Inside jingle. Bummm….bum bum bum BUM! The chip behemoth reported a profit that was better than expected (following two straight quarters of losses) and sales that topped forecasts as well. And the most encouraging sign for the Dow tech giant? Intel thinks the PC market is recovering…and that the artificial intelligence revolution will lead to further gains.
Intel CEO Pat Gelsinger said during prepared remarks for the company’s earnings call Thursday that the company “worked closely with our customers to manage client CPU inventory down to healthy levels” and that “we see a sustained recovery in the second half of the year as inventory has normalized.” Gelsinger added that the AI PC is “a critical inflection point for the PC market over the coming years”, comparing it to the early stages of mobile and Wi-Fi chips in the early 2000s.
“We believe that Intel is very well positioned to capitalize on the emerging growth opportunity,” he said, adding that Intel also is “positive on the long-term outlook for PCs, as household density is stable to increasing across most regions and usage remains above prepandemic levels.”
Investors loved the news. Shares of Intel rose almost 6% Friday morning and the stock is now up a healthy 38% this year. But as good as that sounds, it’s worth pointing out that Intel remains a laggard in the chip sector. The benchmark Philadelphia Semiconductor Index has soared more than 50% in 2023. And top rivals AMD and Nvidia have soared 75% and nearly 220% respectively.
So while it is encouraging for Intel and its investors that the PC market is recovering, Intel (at least in the eyes of Wall Street and many in Silicon Valley) still has a lot of catching up to do in the AI/cloud world.
Intel’s stock is still down about 10% over the past year and has lost nearly a quarter of its value over the past five years…all while Nvidia, AMD and many other chip stocks have thrived. Intel is still a megacap company, with a market valuation of $150 billion. But AMD, once considered a pesky but small rival, is now worth a bit more. And Nvidia now has a market cap of above $1 trillion! Could Nvidia replace Intel in the Dow sometime soon? Hmm.