Intel is struggling to make enough AI server chips and dealing with a weak PC market. Investors will soon find out the degree to which AMD is suffering from the same problems.
AMD reports earnings on Tuesday.
Advanced Micro Devices shares are getting caught up in the intense market reaction to Intel's earnings.
Intel (INTC) is experiencing twin pressures within its business. Sales of personal computers are weakening due to inflated memory-chip prices, and the company isn't able to make enough server chips to satisfy robust demand for central processing units.
Since AMD (AMD), like Intel, makes CPUs for both PCs and data centers, the question for AMD investors concerns the degree to which Intel's issues are related to industrywide dynamics versus company-specific missteps.
For now, AMD shares are off about 10% in premarket action Friday, while Intel's stock is off more than 25%.
AMD is due to post its own earnings on Tuesday afternoon.
The troubles in the PC market likely extend beyond Intel. Even before Intel's report, third-party estimates indicated industrywide PC shipments were down by some 20% in the third quarter relative to the same period a year earlier. That marked an escalation from the mid-single-digit decline seen in the second quarter, Bernstein analyst Stacy Rasgon wrote in a preview of both AMD's and Intel's earnings.
Following Intel's report, Cantor Fitzgerald analyst C.J. Muse wrote that a "decline in the PC market is not a surprise," given high memory prices, but the extent of Intel's declines proved "a meaningful surprise." The company's results implied a 45% drop in unit sales relative to a year before, he said.
Intel's management team noted that while elevated memory prices are crimping PC demand, another issue is that corporate information-technology teams now face more limited budgets for equipment purchases.
Some of Intel's problems in server chips, however, might relate to its own poor execution. In particular, the company seems to have misjudged the respective demand outlooks for the PC and server businesses, leaving it with too much production capacity for PC chips, all while it can't meet the booming server demand.
Chip companies across the board can't satisfy all the demand for artificial-intelligence chips, but the issues might be especially pronounced at Intel. Cantor Fitzgerald's Muse noted Intel's "clear loss of share to AMD in servers."
-Emily Bary
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