Intel’s stock plunge shows that Wall Street still hasn’t learned its lesson on AI hype


Share post:

Intel Corp.’s disappointing forecast for the first quarter includes another anticipated double-digit decline in the company’s data-center business, as the chip maker has yet to capitalize on its AI opportunity.

Since its third-quarter earnings, Intel’s stock
has surged about 50%, in part due to the potential of providing chips for artificial intelligence. One analyst said in November that Intel represented a potential “under-the-radar AI opportunity.” But on Thursday, its shares tumbled about 11% after hours on its lower-than-expected forecast for the first quarter.

Also read: Intel’s earnings forecast comes up well short and the stock is tanking

The data center is where Nvidia Corp.
has been cleaning up with its graphics unit processors (GPUs) designed for AI training and inference applications. Nvidia’s data-center business grew nearly 280% in its fiscal third quarter, as it continues to see nonstop demand for its GPUs to accelerate AI applications.

Intel Chief Financial Officer Dave Zinsner told analysts Thursday, though, that the company has a $2 billion pipeline for its accelerator product line, code-named Gaudi, a chip that is expected to compete with Nvidia. The next iteration, Gaudi 3, is expected to launch sometime in 2024, but CEO Pat Gelsinger did not give any specifics on timing.

“While the data center has seen some wallet-share shift between CPU and accelerators over the last several quarters, we expect growth in CPU compute cores to return to more normal historical rates and our discrete accelerator portfolio, with well over $2 billion in pipeline, to gain traction as we move through 2024,” Zinsner said Thursday.

Marbel Lopez, principal analyst at Lopez Research, said she believes Intel’s AI story is not going to kick in until the third quarter. “Inferencing is Intel’s strength and where they can win,” she said. “It’s just a longer-term game.”

Some analysts are more skeptical. Gene Munster, a managing partner at Deep Water Asset Management, told CNBC after Intel’s call that he does not believe Intel is going to get the big lift from AI that it is hoping for. “There are better ways to play the AI silicon opportunity,” he said.

Lucas Keh, an analyst at Third Bridge, said in a note to clients that he believed Intel’s new products are coming out at a slower-than-expected pace, and that software is one of the bottlenecks. He said investors were disappointed with a slower-than-expected product ramp.

“It also brings the new question of where exactly cloud players’ appetite are for Nvidia alternatives outside of their own custom silicon developments,” Keh said.

In addition to the data center, Intel also has opportunity in the PC space, where it believes that new, AI-ready PCs with Intel chips that can compute AI queries on the device instead of the cloud, will begin to take off starting in the second quarter and running through the second half of 2024.

But the lesson here is that investors got a bit ahead of themselves on Intel’s AI story, and a reminder that there is still a lot of hope surrounding AI — but not every company has concrete numbers yet.

Check out On Watch by MarketWatch, a weekly podcast about the financial news we’re all watching — and how that’s affecting the economy and your wallet. MarketWatch’s Jeremy Owens trains his eye on what’s driving markets and offers insights that will help you make more informed money decisions. Subscribe on Spotify and Apple.  

Source link

Alexandra Williams
Alexandra Williams
Alexandra Williams is a writer and editor. Angeles. She writes about politics, art, and culture for LinkDaddy News.

Recent posts

Related articles

Trump Media’s DJT stock rises again after call to stop ‘naked’ short selling

Trump Media & Technology’s stock rallied Friday and was headed for a third straight gain after the...

P&G’s stock falls after sales miss, as baby and health-care volumes declined

Shares of Procter & Gamble Co. slipped Friday, after the consumer packaged-goods company reported fiscal third-quarter sales that...

Constellation Brands moves itself further away from cannabis grower Canopy Growth’s business

Alcoholic-beverage giant Constellation Brands Inc. on Thursday announced a number of moves intended to further wash its...

Nordstrom confirms it’s looking to go private, with founding family interested in deal

Nordstrom Inc. has formed a special committee of independent directors to explore going private, the company said...

AMC poised for market-share gains, boosted by premium screens and concert movies, Wedbush says

Movie-theater chain and original meme stock AMC Entertainment Holdings Inc. is well positioned to grow its market...

Equifax says weaker mortgage demand is weighing on its business

Shares of Equifax fell after hours on Wednesday after the credit-scoring giant reported first-quarter revenue that missed...

Biden calls for tripling tariffs on Chinese steel, probing Beijing’s potential unfair trade practices in shipbuilding

President Joe Biden’s administration on Wednesday rolled out new measures that aim to protect U.S. industries and...

ASML orders miss estimates as CFO says it’s still on track to meet 2025 goal

ASML Holding, the Dutch microchip equipment maker whose machines are so high tech that the U.S. limits...