Intel Corp.‘s (NASDAQ:INTC) AI-driven server demand offers a growth opportunity, but a deeper PC slowdown and costly foundry investments threaten its turnaround, says analyst.
Rising memory prices have been weighing on PC demand, particularly laptops, but the slowdown “came a little sooner and deeper than we thought,” Intel’s corporate vice president of investor relations, John Pitzer, told MarketWatch.
Despite progress in chip manufacturing, Intel’s latest results highlighted the challenges of turning its turnaround efforts into a “sustained recovery,” eMarketer senior analyst Asa Hiken told the publication.
Intel has benefited from a surge in data-center server CPU demand driven by the rise of agentic AI, strengthening its position in the AI market beyond traditional GPU competition. However, Hiken cautioned that the demand may not be enough to offset near-term challenges, particularly continued weakness in the PC market.
The chipmaker’s long-term growth hinges largely on its foundry business, with its advanced chip-packaging technology emerging as a promising area attracting customer interest and Wall Street optimism, Hiken said.
Hiken noted that Intel faces massive chipmaking costs and must secure significant foundry customer commitments to justify its investments and reassure investors about the business’s viability.
Weak Q4 Outlook Overshadows Earnings Beat
In the third quarter, Intel beat quarterly earnings and revenue estimates, reporting adjusted EPS of 52 cents against expectations of 40 cents and revenue of $16.51 billion versus the $16.47 billion consensus. However, its fourth-quarter guidance disappointed, with projected adjusted EPS of 25 cents and revenue of $15 billion-$16 billion, both below analyst expectations.
CEO Lip-Bu Tan said CPU demand remains “robust” despite near-term PC industry weakness, with the company prioritizing increased supply of its Xeon processors while strengthening its product lineup and roadmap to drive long-term growth and shareholder value.
Intel’s stock slumped about 23% after hours on Thursday, prompting CNBC’s Jim Cramer, who had previously called it his favorite stock, to express anger and disappointment. Deepwater Asset Management’s Gene Munster attributed the weak outlook to slowing PC demand amid high memory costs, cautioning that Intel’s challenges should not be viewed as a warning for Nvidia Corp. (NASDAQ:NVDA), which continues to beat estimates.
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Price Action: Year-to-date, INTC stock has surged 149.51%, as per Benzinga Pro. During Friday’s pre-market trading session, the stock was trading 25.31% lower at $68.77.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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