Citi analyst Christopher Danely has revised his outlook on Intel’s stock, downgrading it from Hold to Sell amid the recent surge in share prices attributed to a strategic partnership with Nvidia, a leader in artificial intelligence technology. The stock had gained momentum following the announcement that Nvidia would be investing $5 billion in Intel while also integrating Intel’s central processing units (CPUs) into its AI server systems.
Despite the initial positive reaction from investors, Danely expressed skepticism regarding the true implications of the partnership for Intel’s competitive edge. While the collaboration discusses the use of Nvidia’s advanced AI technologies in Intel’s CPUs, Danely’s analysis suggests that simply incorporating Nvidia’s graphics chiplets does not enhance the performance of Intel’s CPUs in the highly competitive personal computer market. He emphasized that the CPU itself remains the primary performance driver and questioned whether this integration makes Intel’s products more appealing to consumers.
Furthermore, Danely pointed out that although Intel is set to supply CPUs for Nvidia’s AI server systems, he perceives the market potential for this deal as limited, estimating it to be between $1 billion and $2 billion. This contrasts sharply with Nvidia CEO Jensen Huang’s assertion that he believes the market opportunity could reach approximately $30 billion.
In his assessment, Danely also highlighted concerns over Intel’s leading-edge foundry business, which has faced challenges and is currently undergoing significant restructuring, including mass layoffs and halted factory expansions. He remarked that the partnership announcement notably lacked any mention of Intel’s foundry operations, which have been a substantial source of losses for the company. As a result, Danely concluded that the stock is currently overvalued based on expectations of success in Intel’s foundry business, which he believes is unlikely to materialize.
Following this critical analysis, Intel’s shares experienced a slight decline in premarket trading on Friday, reflecting investor sentiment influenced by Danely’s downgrading of the stock.
