Intel’s landmark partnership with Nvidia sent its shares soaring to their best one-day performance in nearly four decades.
But Wall Street’s enthusiasm is far from unanimous.
Citi analysts issued a downgrade on the stock just a day after the rally, warning that Intel’s challenges in its foundry ambitions and processor competitiveness remain unresolved.
Citi moves to sell rating
Citi lowered its rating on Intel shares from “neutral” to “sell” in a note to clients on Friday.
The bank’s analyst Christopher Danely argued that Intel’s stock is pricing in success in its leading-edge foundry business, an outcome he views as “minimal chance to succeed.”
While Citi lifted its price target to $29 from $24, the revised target still represents a 5.1% downside from current levels.
“We downgrade Intel … given our belief the stock is pricing in success in its leading-edge foundry business, which we believe has minimal chance to succeed,” Danely wrote.
Intel shares had surged more than 22% on Thursday following news that Nvidia would invest $5 billion in the company, marking Intel’s best daily performance since October 29, 1987, when the stock jumped 26.4%.
However, the downgrade tempered some of the momentum, with shares slipping 0.5% in pre-market trading on Friday.
Nvidia partnership seen as limited boost
The collaboration between Intel and Nvidia will involve integrating Nvidia’s graphics technology into Intel’s central processing units (CPUs), as well as building CPUs for Nvidia’s AI platforms.
The move was positioned as a way to give Intel a foothold in the rapidly growing AI market while enhancing its competitiveness in PC processors.
Yet Citi analysts remain unconvinced.
Danely noted that while graphics integration may add features, it does not fundamentally improve a CPU’s performance — the main metric for competitiveness in the processor market.
Rival Advanced Micro Devices (AMD) already offers CPUs with strong multi-core performance at lower prices, creating an additional hurdle for Intel.
“We doubt this makes Intel CPUs more competitive as integrating another company’s graphics wouldn’t make a CPU more competitive given the processor is the main performance driver for a PC,” Danely wrote.
Citi also raised questions about the financial scale of the deal, highlighting that the total addressable market (TAM) for Intel and Nvidia’s joint AI offering is relatively modest.
According to the note, the opportunity is estimated at only $1 billion to $2 billion, a figure Citi believes is insufficient to significantly shift Intel’s long-term growth prospects.
Market sentiment remains cautious
The downgrade underscores broader caution among analysts covering Intel.
Of the 47 analysts tracked by LSEG, 39 have issued “hold” ratings, reflecting uncertainty about whether the company can successfully execute its turnaround strategy.
Intel has been under pressure to revitalize its core business while building out its foundry operations to compete with Taiwan Semiconductor Manufacturing Co. and Samsung.
While the Nvidia partnership provides a boost to investor sentiment, Citi’s call suggests Wall Street remains skeptical that Intel can regain sustained momentum in the highly competitive semiconductor sector.
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