Intel (INTC) has made progress by "right-sizing" its business through cost cuts, balance-sheet improvements and a strategic partnership with Nvidia (NVDA), but near-term upside may be limited by margin and manufacturing risks, RBC Capital Markets said in a report emailed Thursday.
Intel's business is "getting back on track" after aggressive operating-expense rationalization and improved liquidity, and the US government's equity stake could help attract potential customers to Intel's "Foundry" business, the report said.
The Nvidia partnership is "a significant positive," potentially helping Intel strengthen its position in x86-based AI servers and drive share gains in notebook PCs through CPUs that integrate Nvidia RTX chiplets, the report said. The relationship could also open longer-term foundry and advanced packaging opportunities, the report said.
Personal computer and server demand remains "healthy," helped by an improving product roadmap, though Intel continues to lag rivals in data-center artificial intelligence and faces pressure from higher memory prices and supply constraints, RBC said, adding that "further outperformance will largely depend on gross margin upside and Foundry customer announcements."
RBC initiated coverage of Intel with a sector perform rating and a $50 price target, citing limited visibility into "manufacturing yields" and timing of further improvements.
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