Intel’s cloud growth lifts shares, fires up other chipmakers

Business

(Reuters) – Intel Corp’s (INTC.O) shares rose 5% on Friday after demand from data centers fired up the chipmaker’s cloud business and allayed concerns of market share loss to rival AMD (AMD.O), lifting shares across the sector.

FILE PHOTO: Computer chip maker Intel’s logo is shown on a gaming computer display during the opening day of E3, the annual video games expo revealing the latest in gaming software and hardware in Los Angeles, California, U.S., June 11, 2019. REUTERS/Mike Blake

At least seven brokerages raised their price targets on Intel’s stock, with J.P.Morgan making the most aggressive move by boosting its target by $12 to $80, well above the median price target of $64.

Revenue at Intel’s data center business jumped 19% and sales to cloud computing providers were up 48% year-over-year in the fourth quarter.

“We think Intel is benefiting from an improving macro economic climate versus company specific improvements at this time,” RBC Capital Markets analyst Mitch Steves said, adding that he expects strong quarters from data center rivals AMD and Nvidia (NVDA.O).

Shares of AMD, which will report earnings next week, rose 1% to a record high. Nvidia shares were also up 1.5%.

Major chipmakers such as Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW) and Texas Instruments (TXN.O) have also given upbeat forecasts this month, cementing hopes of a rebound in the market that fell nearly 12% in 2019, according to research firm Gartner.

However, Intel has been facing a shortage of PC-centric chips and has struggled with delays on its 10nm chip making technology, losing its lead to rival TSMC.

AMD has partnered with TSMC to launch several new products based on the smaller 7nm design and take market share from Intel, particularly in areas such as 5G, automotive and artificial intelligence.

“We continue to expect competitive headwinds to impact Intel’s server and PC CPU strongholds over the next few quarters, as AMD continues its onslaught on Intel’s hegemony,” Morningstar analysts said.

Intel said it would release nine 10nm products this year and launch its lead 7nm product next year.

“This is good news, as Intel will need 10nm products to remain competitive,” KeyBanc analysts said.

Analysts expect 2020 to be a year of growth from chipmakers fueled by the “new data economy” that includes 5G, artificial intelligence, autonomous driving and internet of things.

Shares of other chipmakers such as Lam Research Corp (LRCX.O) and Applied Materials (AMAT.O) also rose more than 1%.

Reporting by Neha Malara and Supantha Mukherjee in Bengaluru; Editing by Saumyadeb Chakrabarty

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