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How Intel’s Supply Issues Could Dent AMD’s Nvidia Business


Oct. 3 2018, Updated 1:10 p.m. ET

Impact of Intel’s supply constraints

Intel (INTC) has been facing supply issues related to its 10-nanometer (nm) processor chips that are expected to dent PC shipments this holiday season by as much as 7%, according to a prediction by J.P. Morgan last month. The company’s interim CEO recently stated in a letter that it would meet the supply needs for 2018 and has thus reiterated its revenue outlook.

Intel is looking to achieve its supply goals by ramping up its capital expenditure investment by $1 billion into its 14-nm manufacturing sites. Further, according to a J.P. Morgan analyst, the company has already converted some of its 14-nm manufacturing capacity to the 10-nm process. However, the company remains concerned due to the expected delay in the volume production of its 10-nm manufacturing technology to holiday 2019.

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Will AMD stock rise?

Amid Intel’s manufacturing and supply issues, Advanced Micro Devices (AMD) has emerged as a winner, which is likely to boost its 7-nm processor chips next year. The event has given AMD new opportunities to gain market share in the PC processors from its primary rival Intel. AMD reportedly plans to ship 7-nm PC CPUs in the first half of 2019 in comparison to Intel’s 10-nm PC CPUs, which aren’t expected to be produced until the holiday season of 2019.

Intel’s CPU shortages to hurt rivals

The supply shortage in Intel CPUs could also hurt AMD’s and Nvidia’s (NVDA) PC GPU business, which uses systems containing Intel CPUs. Intel’s shortages are also expected to dent the PC makers such as HP (HPQ), Dell, Lenovo, and other big PC makers. Intel’s manufacturing and supply issues could also directly impact DRAM makers such as Micron (MU) and could hurt PC DRAM sales and hit DRAM prices.

Analyst recommendations

Out of the 40 analysts covering Intel, 19 analysts have rated the stock a “buy,” while 15 analysts rated the stock a “hold.” Six of the analysts have given the stock a “sell” rating. Analysts have set a target price of $55.26 for the stock and a median consensus estimate of $56.00. Intel is now trading at a 17.1% discount to its consensus median target estimate.


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