This is not investment advice. The author holds no positions in the stocks referenced in this article.
Positive Sentiment Surrounding Intel in 2023
Since the beginning of the year, Intel has experienced a surge in positive sentiment, primarily fueled by expectations that the Trump administration would safeguard the semiconductor giant from potential market turmoil. The repercussions of Intel failing would contradict the administration’s “America First”policy, making its survival crucial. Recent discussions about a potential joint venture between Intel and TSMC have further heightened expectations, with TSMC offering its technological prowess to bolster Intel’s capabilities, supported by encouragement from the administration.
KeyBanc’s Analysis and Current Ratings
According to a recent report by KeyBanc, analyst John Vinh has reiterated a ‘Sector Perform’ rating for Intel, while simultaneously cautioning about the risks that AMD faces in an emerging price competition environment. Vinh’s assessment includes notable advancements for Intel, particularly concerning its upcoming 18A technology.
Intel’s Progress on Panther Lake and GPU Wins
Vinh emphasizes that Intel’s 18A process is on track to roll out the Panther Lake architecture in the second half of 2025, with key performance indicators (KPIs) showing positive trends in yield and defect rates. A critical point made by Vinh states:
“We believe INTC [Intel] has won the GPU gaming socket for the Nintendo Switch 3 on 18A.”
Pricing Strategy and Market Gains
In his analysis, Vinh points out that Intel’s strategic decision to reduce the prices of its Lunar Lake CPUs by 20 to 40 percent has led to noteworthy market share improvements against AMD. However, this decision carries the potential downside of limiting Intel’s gross margin recovery for the year. Additionally, stronger-than-anticipated demand in the server market is expected to benefit Intel further.
AMD’s Downgrade and Market Challenges
In contrast, KeyBanc has downgraded AMD from a ‘Sector Overweight’ rating to ‘Sector Weight’, addressing concerns around the sustainability of AMD’s AI GPU operations in China. The ongoing price competition with Intel poses additional risks to AMD’s gross margins. Vinh predicts that AMD will face challenges in capturing more market share from Intel, especially with Intel’s advancements in the 18A process.
Market Conditions and Future Outlook
Vinh’s insights suggest that while AMD’s stock may seem undervalued at 13x its projected 2026 earnings per share, semiconductor stocks are often susceptible to margin risks. He notes:
“While the stock is relatively inexpensive, trading at 13x our 2026 EPS estimate, semiconductor stocks rarely perform well with risk to GMs, which we are increasingly concerned about given the aggressive price cuts by INTC [Intel].”
Emerging Opportunities for AMD
Interestingly, Vinh recognizes the anticipated demand surge for AMD’s MI308 GPU, a perspective echoed by JPMorgan analyst Harlan Sur, who forecasts that AMD’s AI GPU market could see a remarkable 60% growth by 2025.
For more detailed insights, see the full article from KeyBanc here.
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