Source-Reuters
Intel’s Revenue and Profit Forecast below Expectations
Intel (INTC.O) unveiled a disappointing second-quarter revenue and profit forecast on Thursday, sending shockwaves through the market and causing its shares to plummet by approximately 8%. The tech giant’s projections fell short of market estimates, highlighting challenges stemming from weak demand for its traditional data center and PC chips. The surge in the market for artificial intelligence (AI) components has particularly impacted Intel’s performance, with businesses favoring spending on advanced AI server chips over Intel’s central processing units (CPUs), which have historically powered data centers for decades.
Nvidia Dominates AI Chip Market as Intel Struggles
Nvidia, bolstered by its powerful graphics processing units (GPUs) and innovative software, has asserted dominance in the AI chip market, commanding an impressive 80% share in the previous year. Conversely, Intel has faced setbacks, with its stock value plummeting by $11 billion following the announcement of its underwhelming results. In contrast, Nvidia’s value surged by $40 billion, fueled by strong performances from tech giants Microsoft (MSFT.O) and Alphabet (GOOGL.O), as they intensify their efforts to expand their AI product offerings within the cloud sector.
Intel’s Strategic Moves and Optimism Amidst Challenges
Despite the challenges, Intel’s CEO, Pat Gelsinger, remains optimistic about the company’s prospects. Intel has launched its third-generation Gaudi 3 processor in April, aiming to enhance its competitiveness against Nvidia in the AI chip market. Gelsinger expressed excitement about the potential of enterprise AI customers, emphasizing the transformative impact of AI on businesses. Additionally, Intel anticipates a rebound in personal computer sales in the latter half of the year, driven by an anticipated PC upgrade cycle around the release of a new version of Microsoft’s Windows operating system.
Gelsinger highlighted the industry’s trend of a first-half, second-half performance divide, expressing confidence in Intel’s products performing better in the latter part of 2024. However, challenges persist, including supply constraints on Intel’s most advanced PC chips due to manufacturing bottlenecks. Despite these obstacles, Intel remains committed to its vision, with plans to improve its foundry business and enhance operational efficiency. Adjusted gross margin rose to 45.1%, surpassing analysts’ expectations, signaling resilience amidst the challenges faced by the tech giant.
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