Intel shares were gaining early on Friday. Analysts were upbeat about the chip maker’s results but expressed cautious confidence in both its manufacturing and artificial-intelligence strategies.
Intel
(ticker: INTC) shares were up 7.3% at $34.90 in premarket trading on Friday after its third-quarter earnings report the previous day. That’s set to add to a 23% gain this year so far through to Thursday’s close.
For bulls on the stock, Intel led by CEO Pat Gelsinger provided further signs that its chip-manufacturing services are attracting clients and investment. The costly expansion of the Foundry business has taken its toll on margins, but a gross margin of 45.8% for the quarter beat expectations of around 43%.
“We expect sentiment to continue to improve on moderating share losses, improving execution, margin recovery, Foundry progress, and emerging AI opportunity,” wrote Raymond James analyst Srini Pajjuri in a research note.
Pajjuri raised his target price on Intel to $42 and kept an Outperform rating on the stock.
Another major question hanging over the stock is whether Intel can compete with
Nvidia
(NVDA) and
Advanced Micro Devices
(AMD) in the market for chips to power AI data centers.
Nvidia
shares were up 1.8% in premarket trading, while AMD was up 2.2%.
“Intel looks to be having success with its new products recently released while it continues to bleed market share to AMD in the mainstream volume server space,” Benchmark Research analyst Cody Acree wrote.
Acree kept a Buy rating and $42 target price on the stock, arguing future chip releases will likely help it win back share in data centers.
Even for the bears, Intel provided a better performance than expected. However, Truist Securities analyst William Stein noted that the improvement was driven by signs of recovery in the personal-computer market. That’s a good sign for Intel but it will likely face tougher competition in the sector in future, with Qualcomm (QCOM) recently announcing a push into AI-capable chips for PCs.
“We see this less as a structural change and more as a cyclical improvement coming 1-2 quarters earlier than we modeled,” Stein wrote. He kept a Hold rating on the stock but raised his target price to $38 from $37.
Write to Adam Clark at adam.clark@barrons.com
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