In a note to clients Thursday, analysts at Deutsche Bank provided an update on Intel (NASDAQ:INTC), noting that AI traction has been slow compared to peers, but that the company is making progress on several fronts. The firm reiterated a Hold rating on INTC stock and a price target of $38.
Deutsche Bank’s update to clients followed an investor meeting with Intel’s VP John Pitzer. “Intel remains optimistic regarding its ability to benefit from the AI megatrend, although with initial traction being limited versus peers,” wrote the analysts in the note.
In the AI generator market, Intel expects to generate over $500 million in Gaudi revenue this year, acknowledging “this is a small fraction of the revenue being generated by GPU and ASIC players, with a larger step up likely being dependent on Falcon Shores (2025-26).”
As for the AI PC market, Intel expects to ship 40M units of AI PC processors in 2024 (Meteor Lake). “We believe future products (Lunar Lake) will be significantly more AI-targeted (expect more color from Intel at Computex),” said Deutsche Bank.
Intel also expects to benefit from the upcoming Enterprise PC refresh cycles as companies future proof via mixing up to AI PCs “yielding an improved mix.”
Intel’s recent split of its operations into Foundry and Product segments led to some disappointment among investors over the break-even time within Foundry. However, the analysts note that this duration will allow for the product mix to transition from less efficient to more profitable nodes.
“From a target model perspective, we believe Intel attaining its 60/40% GM/ OM targets by 2030 is based on the company showing significant improvement in its manufacturing costs (18A), ramping external Foundry revenue (DBe ~$5b in 2026-27 and ~$15b by 2030), and ramping its Products/Other segment revenue via gaining traction/share in DCAI and steady growth in its remains segments,” added the analysts.
“The financial benefits from the company's necessary but costly transformation efforts remain many years into the future. Consequently, we expect Intel to remain a "show me story" with the company needing to deliver solid improvement,” they concluded.
INTC stock was trading at $31.98 Friday morning.