- Apparently the desktop market in particular is… not falling as fast as it was, which is not to say coming back yet… and that helped boost Intel to an unexpected profitable quarter.
- Pulling in Ericsson as a foundry customer is a good start…
- Continuing to lose server share to AMD and to become relevant in AI.
Anyone have thoughts on whether this is a tailwind for AMD as well, or less so because of a) price point of most desktop parts b) AMD focus on server/data center products and AI, followed by laptop sales, with desktop probably lowest priority?
Is Nvidia the more interesting/important point of comparison vs. Intel?
“There’s a lot of interest in the industry for advanced packaging, because it is essential to deliver high-performance computing and AI,” Gelsinger said. “So we expect a lot more business coming our way in that area.”
On Tuesday, the company said it would work with Swedish telecommunications gear maker Ericsson (ERICb.ST) on a chip that Intel will fabricate with its most advanced manufacturing technology it has disclosed.
## LAGGING IN AI
Sales in Intel’s data center and artificial intelligence business fell 15% to $4 billion from $4.7 billion in the year-ago quarter.
Those results beat Wall Street estimates, but reflect that cloud majors Microsoft (MSFT.O) and Alphabet expect to ramp up spending on data centers with most of the spending benefiting Nvidia (NVDA.O) that makes chips for AI.
The focus on chips that are suited for AI computing in the cloud have hurt the market for server chips for Intel, as has a sluggish recovery in China.
“It is still very clear that Intel is absolutely losing share around server CPUs, and I think it is fair to say that they are fighting for relevance in AI,” said Jenny Hardy, portfolio manager at GP Bullhound that owns AMD and Nvidia stock.
An inventory glut in server central processing units (CPUs), will persist until the second half of the year, Gelsinger said on the conference call, and that data center chip sales will decline modestly in the third quarter before recovering in the fourth quarter.
Gelsinger said right now Intel has enough customer orders to sell at least $1 billion worth of its AI chips through 2024.
Intel forecast adjusted current-quarter earnings per share of 20 cents. Analysts polled by Refinitiv expected 16 cents.
It forecast adjusted revenue of about $12.9 billion to $13.9 billion, compared to estimates of $13.23 billion. The midpoint of $13.4 billion exceeded estimates but still implies a 12.6% drop over the year in Intel’s business.
Intel forecast adjusted gross margin of 43% for the third quarter, compared to estimates of 40.6%.
Intel shares have risen about 30% so far this year, compared to a 50% rise on the Philadelphia SE Semiconductor index (.SOX) in anticipation of an industry recovery.