As AMD Gains Ground, Struggling Intel Declares It Will Regain Balance

Intel Corp has suffered a major setback at a time when smaller rival AMD and others are gaining ground. It claims that it will regain its equilibrium this year.

On Thursday, the company surprised the market by forecasting revenue that fell short of Wall Street estimates by about $3 billion. The global economy’s weakness only makes Intel’s challenges more difficult.

Intel is still the 300-pound gorilla in the market for microprocessors, also known as central processing units (CPUs), the brains of computers, and it claims to have completed the worst of a revamp under a new CEO.

“We stumbled, right? We lost share; we lost momentum. We think that stabilizes this year,” Chief Executive Pat Gelsinger told investors on a conference call.

According to IDC, Intel continues to dominate the markets for PC and server processing chips, with a market share of more than 70%. However, this is a decrease from more than 90% in those markets in 2017.

“Someone going from 1% to 13% is significant. It tells you that now there’s a viable second competitor in the server processor market, who has momentum and is gaining momentum,” said IDC analyst Shane Rau.

That rival is Advanced Micro Devices, which has come back from the brink of bankruptcy under the leadership of Chief Executive Lisa Su and has been taking business away from Intel quarter after quarter. AMD’s market capitalization is roughly equal to that of Intel, indicating investor confidence in AMD’s growth prospects.

According to Rau, Intel and AMD would both face macroeconomic headwinds and challenges in releasing their latest chips, but Intel would also have to deal with the larger issue of a chip glut. “I don’t think Intel is in a position yet to start regaining market share,” he said.

Customers cannot launch products if new chip designs are delayed, and Intel has failed to deliver its latest data-center chip, codenamed Sapphire Rapids.

“Sapphire Rapids was about two years late. And so because of that, AMD has leapfrogged them,” said Bob O’Donnell of TECHnalysis Research.

Worse for Intel, according to Bernstein analyst Stacy Rasgon, AMD’s latest server chip outperforms Sapphire Rapids on “general purpose workloads” in benchmarks published by the two companies.

Intel is also facing increased competition as graphics chipmaker Nvidia expands into central processors and former processor customers, such as Apple and Amazon, design their own chips.

Gelsinger predicted that 2023 would be a year of stabilization followed by re-acceleration. Intel had taken some difficult steps and now needed to follow through on a good plan, he said. Some people agree.

“Intel’s turnaround is taking some time, exacerbated by the economy, but I believe its plan is working,” said Glenn O’Donnell, analyst at Forrester Research. “It is delivering on new products and its manufacturing is ramping up with agreements from other chipmakers to use Intel’s manufacturing capacity.”

Meanwhile, investors are waiting for the next piece of evidence: AMD will report its results on Tuesday.

(Adapted from USNews.com)

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