Inside Intel: Wall St bets on the decline of one-time chip champion

Wall Street has recently sent a strong signal about accelerating leadership shifts in the US chip industry. If that’s right, Intel’s 40 years at the top have come to an overwhelming end.

Qualcomm is riding the wave of 5G, surpassing Intel last week and halving its stock market value since early October. AMD, a perennial player who plays against Intel on PC and server processors, is showing similar bounces and is at a distance to overtake long-standing enemies.

It’s been over a year since Nvidia’s chips provided high-speed computing for tasks such as machine learning, video games, and supercomputing, and themselves jumped over Intel. Nvidia’s share price has risen nearly 60% since the beginning of October, and its market value is astonishing, four times that of Intel.

What is Intel’s performance during this period?The stock lost further position after an attempt by the new chief Patrick Gelsinger It has leveled off to reassure investors who have been hit. In the early stages of a difficult transition, Wall Street hopes to bounce back to show consistent double-digit growth that Intel hasn’t seen in more than a decade, unsupported by detailed plans. I didn’t want to hear. half.

Intel’s issues are well documented. Missing the smartphone market, losing its long-standing lead in chip manufacturing technology to TSMC, it is beginning to lose its advantage in PC and server processors.

However, recent changes in market sentiment show that confidence in the company’s ability to restore its foothold is much deeper. In short, Wall Street explains Intel’s long hegemony: an unparalleled range of technologies, a long history of good operations (until recent slips), and a financial engine that dwarfs others to correct the ship. I no longer believe it is enough.

The long capital cycle of the chip industry and the roadmap of new technologies make it difficult for you to regain your advantage after you fall behind. Gelsinger has formed an experienced management team, but at the moment Wall Street is willing to give them suspicious interests.

In a way, what surprised me most was the rise of AMD. After declining to $ 2 billion in the middle of the last decade, its market value has recovered to $ 190 billion after a review of the fundamental technology that has made it more competitive in the market for x86 processors created by Intel. Did. Mercury Research has a market share of nearly 25%.

In the data center market, Intel should soon have new products that could start to change the tide. Known as Sapphire Rapids, this is the first processor designed around “chiplets” or tiles. This is a design that has re-competed AMD since 2017, including assembling chips from a set of components rather than making chips from a single piece of silicon.

Benchmarks showing its raw performance have not yet been released, but the chip (promised early next year) could give Intel an edge.

It is unlikely to last long. AMD has promised a next-generation chip based on the Zen microarchitecture by the end of the year. Produced in TSMC’s more advanced manufacturing plant, it packs more features into much less space, achieving twice the density of its predecessor. This means that you can achieve more computing power with less energy. If Intel couldn’t fill the grounds for losing to TSMC with manufacturing process technology, it would be difficult to match.

Meanwhile, Nvidia is also competing to outperform Intel in the data center market.Whether that Controversial acquisition British chip design company Arm is regulatory-approved, and Nvidia is deploying Arm-based processors in its data center products. And since AMD entered the PC market and began replacing Intel processors with their own chip designs, Apple’s new Mac has had impressive performance.

It’s no wonder investors are on the sidelines. What they have to expect is a decline in gross margin and a large investment period of at least the next few years, and it is unclear when growth will recover.

In a stock market swelled by a wave of cheap capital, former (and perhaps future) industry champions are priced at just 13 times the depleted earnings next year, and a dividend yield of nearly 3% may seem stealing. However, few people may be in line to buy until Gelsinger can show that Intel has regained Mojo.

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