The Intel Corporation (NASDAQ: INTC) stock price was up 1.34% ahead of the company's earnings results after the market close today. The move higher could signal investor confidence in the company’s performance during Q2 despite the significant threat posed by Nvidia’s emerging dominance.
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Intel has struggled for many years now to catch up with its peers led by Taiwan Semiconductors (TSMC) in terms of adopting cutting-edge manufacturing technologies for its chips but has had little success in adopting technologies such as the 5nm and 3nm manufacturing processes, leaving it lagging behind the rest of the industry.
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However, Intel faces another major obstacle in the rising adoption of AI, which has triggered significant demand for AI accelerator chips, primarily provided by Nvidia, as opposed to the typical cloud server CPUs manufactured by Intel, AMD and TSMC.
Since many companies operate with fixed cloud data center budgets, buying AI chips means they might have to forego buying server CPU chips, cannibalizing the sales of server CPU chips from Intel. Therefore, Intel might need more time to recoup market share and boost slowing sales.
Another factor against Intel is that its latest generation of server CPUs is considered inferior to AMD’s latest Zen 4 server chips. As such, many companies will likely stop buying Intel’s server chips instead of AMD server CPUs. Companies choosing where to cut their spending could quickly start with Intel’s server chips.
Intel has to work harder to compete effectively with AMD, which has better chip manufacturing capabilities to protect its market share from being eroded further as its customers switch to AMD chips. The company had already lost a significant client, Oracle, which canceled Intel CPUs entirely for this generation and ordered AMD chips instead.
Intel remains a dominant player in the personal computer arena. Still, even there, customers looking for the most potent PCs are choosing AMD over Intel-powered computers due to AMD’s faster chips.
Therefore, investors are looking forward to Intel’s Q2 earnings data, which will shed light on the impact of Nvidia’s rising sales on the company’s sales and prospects.
*This is not investment advice.
Intel stock price.
The Intel stock price was up 1.34% to trade at $34.82, rising from Wednesday’s closing price of $34.36 head of earnings.
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