As the US earnings season kicks off, chip giant Intel is set to release its latest quarterly report after the market closes on Thursday, January 22nd.
According to analysis, Morgan Stanley released a report on January 20th pointing out that in the current complex semiconductor cycle, Intel is facing a highly unique situation: while the supply shortage in the server CPU market has boosted its stock price in the short term and may lead to better-than-expected performance, this supply-demand imbalance conceals deeper worries about constrained capacity and market share loss, which may struggle to support a long-term valuation re-rating.
The direct impact for investors is that while supply constraints are supporting Intel's stock performance in the near term and may help it deliver a report card that beats expectations this week, the other edge of this "double-edged sword" is pointed at its future growth potential. Analysts worry that while Intel is constrained by insufficient capacity and weak growth, competitor AMD will seize the majority of incremental growth in this market segment. Furthermore, Intel's internal capacity crunch serves as a poor "advertisement" for potential foundry customers already concerned about competing for resources with Intel's own internal demand, likely further eroding market confidence in its foundry business.
Consequently, although the market widely expects Intel to emphasize long-term supply agreements with hyperscale cloud providers, during the upcoming earnings call, investor focus will extend beyond short-term revenue figures. The market will be eager for management to provide answers: against a backdrop of continued margin pressure and weak first-quarter growth expectations, how will Intel resolve its capacity bottlenecks? And how will it counter AMD's expanding lead in the server market? Morgan Stanley currently maintains an "Equal-weight" rating on Intel.
**The Tug-of-War Between Short-Term Benefits and Long-Term Concerns**
For the earnings report due on Thursday, Morgan Stanley predicts Intel might deliver a slight surprise on Earnings Per Share (EPS). Analysts expect the current supply shortage to help Intel exceed market expectations on certain metrics. Specifically, Morgan Stanley forecasts Intel's non-GAAP revenue for the December quarter at $13.31 billion, down 6.7% year-over-year and slightly below the Wall Street consensus of $13.407 billion. However, the Data Center and AI (DCAI) business is expected to achieve 11.5% sequential growth.
Yet, this short-term performance boost fails to掩盖 underlying structural issues. Morgan Stanley analyst Joseph Moore noted in the report that while supply constraints aid short-term visibility, the fact that "internal capacity is sold out even with minimal growth" is concerning. This not only means Intel is missing out on the benefits of the current demand rebound but is also ceding most of the incremental market to competitors. AMD has clearly stated that its Venice series products will further expand its lead in the server market this year, while Intel's current products still struggle to compete on performance.
**A Gap in the Product Roadmap**
In terms of product competitiveness, Intel is in an awkward transition period. Although the 18A-process-based Panther Lake shows some potential in the notebook segment, demonstrating the viability of the new process, Intel still has to wait in the critical server and high-performance desktop markets.
The report indicates that Intel needs to wait until the launch of Nova Lake in late 2026 to regain competitiveness in the high-performance desktop arena. The situation in the server market may be even more severe. Management has hinted that Diamond Rapids might lack Simultaneous Multithreading (SMT) technology, suggesting Intel may have to wait until Coral Rapids in late 2027 to truly catch up on performance. Over this multi-year window, the current product line's inability to fully capitalize on surging market demand will continue to cap upside potential for its stock price.
**A Crisis of Confidence in the Foundry Business**
The core pillar of Intel's transformation—its wafer foundry business—is also being clouded by the current shortage situation. Morgan Stanley has been skeptical of Intel's foundry story, and the current capacity woes intensify these concerns.
For external customers evaluating whether to place orders with Intel, seeing the company struggle to meet its own meager growth demand undoubtedly creates significant distrust. Customers are already worried about competing for capacity with Intel's internal products, and the current situation precisely confirms this risk. Although the foundry narrative provides some support for the stock price, with Intel's product division unable to leverage the demand surge, the foundry business still faces significant challenges in truly winning customers and boosting valuation.
**Financial Forecast and Valuation Outlook**
Looking ahead to the first quarter (March quarter), Morgan Stanley forecasts Intel's revenue at $12.552 billion, slightly above the Wall Street consensus of $12.525 billion. However, for gross margin, Morgan Stanley's forecast is only 34.9%, below the market expectation of 36.1%, reflecting the lower margins of Lunar Lake and ongoing pressure from 18A process startup costs.
Intel's current stock price implies a valuation of approximately 35 times the estimated 2027 EPS, a multiple higher than the average for large logic semiconductor peers. This partly reflects the market's bet on its high-leverage recovery potential and the optionality of the foundry business. However, considering the lack of competitiveness in current server products, most incremental demand flowing to AMD, and the reality of margin pressure, analysts believe the current profitability is insufficient to support further stock price re-rating. Unless Intel can demonstrably prove a recovery in its server market share, an upgrade in its investment rating will be difficult to justify.
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