Intel’s Journey to the Center of Data

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Part 12
Intel’s Journey to the Center of Data PART 12 OF 16

Why Intel’s Analysts Are Divided

Analysts divided over Intel

Wall Street analysts remain divided over Intel (INTC), with 56% of the analysts tracking Intel issuing a “buy” recommendation, 36% issuing a “hold” recommendation, and 8% giving a “sell” recommendation. Notably, analysts are also divided over Advanced Micro Devices (AMD) but appear optimistic about Nvidia (NVDA) and Micron Technologies (MU).

Why Intel&#8217;s Analysts Are Divided

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Trefis highlights competitive risks in data center

Trefis acknowledged that Intel has reported strong growth in the data center market but warned that increasing competition from AMD and Nvidia is putting its dominant position at risk. Intel currently owns a ~99% share in the server processor market, which gives it the power to command prices.

However, the data center market is shifting away from traditional servers to big data analytics and AI (artificial intelligence). Intel launched its new Xeon processors targeted at AI and claimed that it has witnessed a record-high early shipment of ~500,000 new Xeon processors.

But Trefis believes that early shipments alone do not indicate that competitive pressure has subsided. It highlighted that the early shipments came from only 30 customers who are loyal to Intel. There’s still a vast customer base that gives more importance to price-to-performance. AMD’s server processors and NVIDIA’s GPUs (graphics processing units) are seeing increasing adoption in the cloud and AI because they deliver better price-to-performance than Intel’s server processors.

Thus, if Intel maintains a leadership position in the data center market, it will still face competitive pressure and struggle to command prices. However, this competitive pressure wouldn’t necessarily have an immediate impact on Intel’s market share, as data center product changes generally reflect in market shares after 18 to 24 months, according to Mercury Research.

Trefis identifies risk in Mobileye acquisition

Another risk that Intel faces is from Mobileye. The chipmaker purchased Mobileye, a ~$400 million annual revenue company, for the very high price of ~$15 billion. The major challenge comes in justifying this price tag.

Intel has a history of failed acquisitions, such as McAfee, which it acquired in 2011 and spun off as a standalone company in April 2017. It also has a history of not very successful acquisitions, such as Altera, which it acquired in 2015 and is now struggling to use to boost earnings.

For this reason, Intel has to make the Mobileye acquisition pay off by tapping the $70-billion market opportunity for autonomous driving systems, data, and services.

Now let’s discuss the factors that make some analysts optimistic about Intel.


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