As Intel Corp.’s stock plunged to its biggest one-day drop in about three and a half years, analysts had some harsh words for the chip maker.
“How many times can you push the reset button?” Bernstein’s Stacy Rasgon asked in a note to clients.
While he thought many investors were bracing for the company to miss on its first-quarter forecast, the outlook came in “extremely weak and clearly worse than feared.” Intel
expects $12.7 billion in revenue at the midpoint, while analysts had been looking for $14.3 billion.
“After yet another major reset this story probably just shifted to 2026 at the earliest for the bulls, and there is a lot of meat for the bears to sink their teeth into in the meantime,” Rasgon wrote, while sticking with his market-perform rating and $42 target price.
Baird’s Tristan Gerra highlighted challenges for Intel’s data-center and artificial-intelligence unit, which is “on track for a third consecutive year of revenue declines,” while his own revenue forecast implies a 14-year low.
Gaudi, the company’s accelerator chip for artificial-intelligence applications, “does not seem enough to lift [data-center] revenue, while gross margin will be impacted by higher depreciation inclusive of an expected U.S. Chip Act credit,” Gerra continued.
He also expressed some concerns about the company’s broader road ahead.
“Can top-line growth in future years be sufficient to fund continued node migration?” Gerra said. “Many hurdles remain, notably ramping units from this year’s small base (small baseline for Intel 4 makes it more challenging to yield at the next node), while [the Intel Foundry Service] revenue ramp entirely depends on future node execution including yield and performance.”
Gerra has a neutral rating and $40 target price on Intel’s stock.
Shares fell 11.9% in Friday trading, making for their worst single-day percentage decline since July 24, 2020, when they fell 16.2%, according to Dow Jones Market Data.
Needham’s N. Quinn Bolton, meanwhile, downgraded the stock to hold from buy in the wake of Thursday afternoon’s report, calling the earnings reset “unexpected.”
“In addition to an overall worsening risk-reward, Intel’s core [data-center] business is challenged by a shift to accelerated computing architectures and direct competition from AMD and ARM,” he wrote. “We expect AI to remain the spending priority in the data center for the next several quarters. To that end, dollars will continue moving away from Intel’s core competency.”
Rosenblatt’s Hans Mosesmann took a similar view as he argued that Intel’s sales outlook is “contrary to the uber bullish messaging to the Street and is consistent with share losses to AMD, a lack of any perceivable AI growth vector that moves any dial, and points to another, yes another, transitional year.”
Artificial intelligence “seems like everywhere except at Intel,” he continued, noting that his stance on the stock “has not changed for many years.” Mosesmann continues to rate it at sell.
Raymond James analyst Srini Pajjuri, however, was more upbeat about Intel’s ability to capitalize on AI. “While Intel won’t likely get much credit for AI in the near term, we are encouraged by the growing pipeline for Gaudi accelerators ($2b+) and expect meaningful revenue contribution” in the second half of 2024, he wrote, while sticking with his outperform call but cutting his target price to $52 from $54.