Intel's AI Hurdles: Analysts Weigh In on Market Struggles and Revenue Challenges

Intel Corp (INTC) has been grappling with market share and profitability issues, with its struggles in the artificial intelligence (AI) sector drawing concern from analysts. The semiconductor giant's recent third-quarter results revealed a wider-than-expected earnings loss, despite beating revenue estimates. As Intel seeks to regain its footing, analysts have highlighted several challenges and offered guidance for the company's future trajectory.

Goldman Sachs analyst Toshiya Hari maintained a Sell rating on Intel, citing persistent competitive challenges in the Data Center Compute segment and limited near-term revenue potential from external foundry clients. The bank noted significant pressure on Intel's gross margins, with a third-quarter non-GAAP gross margin of 18% — 20 percentage points below company guidance. Goldman Sachs pointed to AMD's growing total cost of ownership advantage in x86 CPUs and increasing competition from custom processors designed by large cloud providers as ongoing challenges for Intel's Data Center CPU business.



Additionally, Intel's lack of a competitive accelerator for AI applications, a rapidly expanding market, further constrains its ability to capture growth in this sector. Reflecting this outlook, Goldman Sachs revised its 2024-2026 EPS estimates and reduced its 12-month price target from $21 to $20.

Benchmark analyst Cody Acree reiterated a Hold rating on Intel amid the company's mixed third-quarter results and limited near-term catalysts. The report acknowledges Intel's slight improvement in fundamentals, supported by cost-cutting efforts and restructuring progress, but emphasizes ongoing competitive pressures from AMD and Nvidia.

While Intel's Data Center segment outperformed initial guidance, AI products underwhelmed, and the company's reliance on outsourced manufacturing for newer products like Lunar Lake could weigh on margins. Needham analyst N. Quinn Bolton has maintained a Hold rating on Intel, highlighting better-than-expected topline results but noting that accelerated foundry development is negatively impacting margins. The firm revised its gross margin estimates downward due to impairment charges and slower-than-anticipated adoption of the Gaudi AI products, which led to the removal of the $500 million FY24 revenue target for Gaudi.



Rosenblatt analyst Hans Mosesmann downgraded Intel to a Sell rating and updated the price target to $20 from $17. The fourth-quarter outlook of $13.8 billion is below the previous estimate of $14 billion, indicating mixed product dynamics and ongoing adjustments. Oppenheimer analyst Rick Schafer remains cautious, citing ongoing market share loss to AMD and slow AI adoption. Oppenheimer maintained a Perform rating, emphasizing a need for Intel's turnaround efforts to take root amid persistent margin pressures.

Truist analyst William Stein maintains a Hold rating on Intel with a price target of $26, raised from $25. The firm expresses concern about the reliability of future earnings metrics and the slow uptake of Gaudi accelerators, impacting Intel's ability to capitalize on AI workload transformations. The firm anticipates continued restructuring and potential for more one-time charges in 2025.

KeyBanc Capital Markets analyst John Vinh has a Sector Weight rating on Intel. The firm says Intel's third-quarter results and fourth-quarter guidance were slightly better than expected, with revenue beating estimates due to improvements in data center AI and networking, although CCG revenues were stable amid customer inventory destocking. KeyBanc says Intel's outlook suggests modest revenue growth ahead, but challenges remain, particularly with slow Gaudi demand affecting AI revenue targets.

In conclusion, Intel faces significant challenges in the AI market, with analysts expressing concerns about the company's ability to capture growth and maintain profitability. To address these issues, Intel must prioritize developing competitive AI accelerators, optimizing its product portfolio, and enhancing its foundry capabilities. By doing so, the company can better compete with AMD and custom processors, stabilize its earnings, and ensure long-term growth in the AI sector.