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The
company's surprise second-quarter profit and its strong earnings
and margin forecasts suggested the personal computer market
slump was nearing an end, sparking the surge in its stock and
the wider chip sector.
Intel is poised to add about $10 billion to its market value,
based on its current premarket price of $37. That is already 6%
higher than Wall Street's median target of $35 after at least 17
brokerages raised their price targets on the stock.
"Intel's turnaround is finally happening," said Glenn O'Donnell,
research director at Forrester.
He also expects "far better quarters ahead for Intel and most
other chipmakers."
Intel's results lifted Advanced Micro Devices and Nvidia by 2.3%
and 1.5%, respectively, while Qualcomm rose 1.5%.
A titan of the American chip industry, Intel has fallen behind
rivals such as Taiwan's TMSC and Nvidia both in terms of margins
and market value as the PC market downturn and stiff competition
in the data center market battered its business.
While Intel's shares have rallied 30% this year after a tough
2022, that has paled in comparison to the more than three-fold
rise in Nvidia, which became the first chipmaker with a
trillion-dollar market value in May after its own "historic"
forecast.
However, that was largely due to the booming artificial
intelligence (AI) market, which Intel has missed out on because
of its small presence in graphics-processing units and other AI
specialist chips that enable the technology behind ChatGPT.
Indeed, Intel's AI and data centers business contracted 15% in
the recent quarter, and CEO Pat Gelsinger said a glut in the
server central processing units (CPU) market will persist until
the second half of the year.
He added that Intel now has enough customer orders to sell at
least $1 billion worth of its AI chips through 2024.
Nonetheless, analysts at Rosenblatt Securities "don't see AI as
an investable theme for Intel currently."
Intel has a 12-month forward price-to-earnings ratio of 31.10,
compared with Nvidia's 43.26 and an industry median of 19.95.
(Reporting by Aditya Soni; Editing by Savio D'Souza)
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