Intel’s “Problem Child” Has Been Spotted
Intel’s “problem child” has been identified, and it has sparked some interest among investors. Analysts have located a significant issue within Intel’s operations, which is raising hopes for change. Following this, shares of Intel (INTC) saw a 2% increase in Wednesday afternoon trading.
- Problem Child: Intel’s foundry business has been identified as the root cause of the company’s struggles.
- Investor Optimism: The identification of this issue has led to renewed investor confidence.
Raymond James analyst Srini Pajjuri pointed out that Intel’s foundry business is currently a money-losing operation. This division incurred a $13 billion loss last year, with an expected $5 billion loss this year.
- Foundry Losses: The foundry’s ongoing losses have negatively impacted Intel’s overall financial performance.
- Potential Split: Pajjuri anticipates that Intel may eventually split this division off due to its struggles.
According to Pajjuri, the foundry business is largely to blame for the decline in Intel’s stock price over the past few months.
- Stock Decline: The losses from the foundry business have contributed heavily to Intel’s stock underperformance.
- Declining Business: Intel’s stock has suffered as a result of these operational issues.
In contrast, Intel’s Products division is in a much stronger position. While growth has slowed compared to previous years, it continues to generate around $50 billion in revenue, with a 25% operating margin.
- Steady Performance: The Products division remains stable and profitable, making it a more attractive business unit.
- Potential Stock Valuation: Pajjuri suggests that, without the foundry business, Intel’s stock could be valued much higher, potentially in the high 30s.
Granite Rapids Opens Up
Intel’s product business continues to show promise with the introduction of its Granite Forest chip line, which has now expanded. The line is primarily focused on the server market, with processors designed for hyperscalers and cloud builders who require high-core density in their systems.
- Granite Forest Line: The addition of new processors augments Intel’s capabilities in the server market.
- Target Market: These processors are aimed at companies that need to maximize the number of cores per socket, reducing the total number of servers needed.
Intel’s Granite River processors, specifically the Xeon 6500P and Xeon 6700P, are considered the core components of the line. However, there are additional models that cater to various processing needs.
- Xeon Processors: The Xeon 6500P and Xeon 6700P serve as the central components of the Granite Forest line.
- Versatility: The diverse models within the line provide flexibility, catering to a broad range of use cases.
These updates to the Granite Forest line show that Intel’s product division is still competitive and well-positioned to meet the demands of modern computing.