Shares of Intel (ticker: INTC) were on the rise on Friday following the release of its second-quarter earnings. While Wall Street analysts viewed the results positively, there were concerns about stiff competition from Nvidia and Advanced Micro Devices (AMD).
Optimism for a Recovery in Personal Computers and Data Centers
Analysts at Melius Research were encouraged by Intel's stronger-than-expected revenue forecast. They see signs of a potential recovery in both personal computer sales and data centers, which are crucial for Intel's future success.
Nvidia's Rapid Growth in the Data Center Sector
One key area of concern for Intel is the data center market, where Nvidia (NVDA) has been rapidly expanding. The demand for Nvidia's graphics-processing units (GPUs) has made it a preferred choice for powering servers that support artificial intelligence. This trend could potentially threaten Intel's dominance in the central-processing unit (CPU) market.
According to Ben Reitzes of Melius, while Intel acknowledges this GPU trend, they believe it can be managed effectively. Despite short-term weaknesses, Melius predicts that Intel's Data Center and Client revenue will experience a "halo effect" from the growth of AI, particularly in 2024. Reitzes maintained a Buy rating for Intel with a target price of $43.
AMD's Challenge in the Data Center Market
Apart from Nvidia, Intel also faces competition from AMD in the data center market. AMD has seen a significant rise in its stock price this year and is planning to launch its own AI chips. Analysts at Oppenheimer remained cautious about Intel's prospects due to the growing competition from AMD and possible limitations on personal computer spending.
While Oppenheimer's Rick Schafer expressed optimism about the data center outlook, he highlighted concerns about PC unit growth and associated revenue. Schafer reiterated a Perform rating on Intel shares without a target price.
In premarket trading, Intel's stock surged by 7.1% to reach $37.00.