Intel shares jump toward best daily gain of the year as presentation lays out plans to reverse a slide in data-center progress
Intel Corp. shares were heading toward their best day of the year following an investor presentation that provided more detail about the company's plans to reverse a slide in manufacturing and market share of data-center chips.
Intel's $(INTC)$ stock was up 7.6% in Wednesday trading, easily the best performance of the day for a Dow Jones Industrial Average component, and was challenging fellow chip maker Micron Technology Inc. $(MU)$ for the biggest gain of the day in the S&P 500 . The increase pushed Intel shares to a March gain of 25.7%, which would be the best month for the stock since November 2001, when it gained 33.7%.
Intel executives detailed their data-center road map in a presentation Wednesday morning, explaining plans to fight back after engineering issues and stronger competition from rival Advanced Micro Devices Inc. $(AMD)$ sliced at Intel's market share in the key segment in recent years.
Intel executives predicted that the company's Sapphire Rapids server chips would reach production of 1 million by mid-2023 and outlined other chips they see following, pushing up the timelines for some of them.
"With our Xeon road map, we are once again demonstrating execution excellence," Sandra Rivera, Intel's executive vice president and general manager for the data center and AI group, said in the presentation.
The most important disclosure in the presentation, according to analysts, was the announcement of a chip code-named Clearwater Forest that is targeted for a 2025 release. Rivera said that chip "will be manufactured on Intel 18A, the node where we plan to achieve process leadership," and called it "the culmination of our five nodes in four years strategy."
SIG Susquehanna Financial Group analyst Christopher Rolland called this "a major improvement as it supports our latest upgrade based on Intel hitting (or even pulling in) their stated road maps." Rolland upgraded Intel's stock to neutral from negative earlier this month, with a $26 price target.
Intel has lost process leadership in recent years. It has struggled to develop next-generation semiconductors for servers as demand for the chips has grown along with the number of giant data centers servicing cloud-computing companies. The chip maker brought back Pat Gelsinger as chief executive in 2021, and he has promised to regain manufacturing supremacy by spending freely.
Advancing its data-center portfolio has become even more important for Intel of late, as the growth of interest in generative AI -- the technology at the heart of ChatGPT and similar artificial-intelligence offerings -- could lead to heightened demand for next-generation chips. Rivera mentioned "the inflection point of large language models that we expect to drive continued demand for accelerated compute" and detailed Intel's road map for graphics-processing units, or GPUs; inference-processing units, or IPUs; field-programmable gate arrays, or FPGAs; and software that will help address those needs.
"Taken together, we think this was a positive event with road map progress clearly encouraging -- though plenty of execution risk remains," Evercore ISI analysts led by C.J. Muse wrote Wednesday, while maintaining an in-line rating and a $30 price target.
Other analysts had more doubts. Bernstein's Stacy Rasgon titled his note "When 'not getting worse' (for now?) is a triumph ..." and questioned whether Intel's expectations for the total addressable market, or TAM, were too optimistic.
"We appear to be at the point on Intel where 'not getting worse' is almost as good as 'getting better.' But we didn't really hear anything unexpected from the event one way or the other, and they are still putting out growth expectations that may come back to bite them," he wrote, while maintaining an underperform rating and a $20 price target.
As Intel's stock has run up more than 25% in March, the PHLX Semiconductor Index has gained 6%, the S&P 500 has edged up 1% and the Dow Jones Industrial Average has slipped 0.2%.