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  Technology   In Other news  28 Jul 2018  Intel shares slip amid fears of AMD data centre chip challenge

Intel shares slip amid fears of AMD data centre chip challenge

Published : Jul 28, 2018, 9:05 am IST
Updated : Jul 28, 2018, 9:05 am IST

Double-digit growth in its data center chip business fell short of analysts’ expectations.

Intel stock continues to be under pressure.
 Intel stock continues to be under pressure.

Intel Corp shares fell 9 per cent on Friday after the chipmaker’s upbeat results were overshadowed by concerns that Advanced Micro Devices Inc may be chiselling off-market share from its high-margin data centre business.
The company’s profit and revenue beat Wall Street targets, but double-digit growth in its data centre chip business fell short of analysts’ expectations and disappointed investors.

“Intel stock continues to be under pressure as investors are looking past near-term outperformance and struggling with the storyline of potential future share loss to AMD,” Barclays analysts said.

AMD shares are up 8 per cent at $19.88 in early trade. Intel shares were trading down at $47.61.

Intel was at the forefront of selling chips used in making servers where data is stored remotely or in so-called cloud servers. Over the past few years, as more companies rushed to the cloud to move data online, Intel enjoyed healthy cloud revenue growth.

Amazon, which beat profit estimates on Thursday due to its cloud business, and Microsoft have been the main beneficiaries of the cloud adoption.

Intel’s Xeon server chips had dominated the market but started facing competition last year following AMD’s re-entry into the business after a decade with EPYC processors that earned positive reviews.

EPYC chips outperformed Xeon in certain tasks and provided better performance-per-dollar than what Intel chips offered, according to tests done by Anandtech after the launch last year.

AMD currently has a small share of the server business, but any gain will hamper Intel’s plans to focus on data centres to diversify away from a stagnating PC business, where it is the market leader.

Intel has delayed the launch of its next-generation 10nm processors due to production woes, which could erode its market share further.

While AMD is already sampling its 7nm processors and will launch them later this year, Intel’s 10nm chips will hit the market next year.

“We see the stock as increasingly binary around their ability to hold off AMD in the data centre,” Morgan Stanley analysts said of Intel. “We don’t see the stock outperforming if AMD successfully takes 3-4 points of server market share in the next 2 quarters and gets to 10% by the end of next year.”

At least four brokerages cut their price targets on Intel stock, while six brokerages had raised their targets on AMD stock after its strong quarterly results earlier this week, mainly due to high demand for server chips.


Tags: intel, amd