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Intel Has a New Data-Center Chip, and Credit Suisse Says the Stock Is a Steal

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A shortage of chips is reverberating through industries such as car manufacturing.

David Silverman/Getty Images

After multiple quarters of delays, Intel officially launched its “Ice Lake” server chips on Tuesday. Following the news, a Credit Suisse analyst called the company the most undervalued and mispriced among those that stand to gain from a global surge in the demand for computing power.

Shares of Intel (ticker: INTC) advanced 0.6% to $65.94 in afternoon trading Wednesday. The PHLX Semiconductor index, or Sox, declined 0.1%.

The new Ice Lake chips boast a performance boost of 46%, Intel said, and are made with its so-called 10-nanometer process. Intel said shipments of the product began in the first quarter, a signal to investors that the company is beginning to recover from manufacturing delays and other issues.

In its announcement, Intel pointed to features beyond its raw performance gains, such as technology aimed specifically at accelerating artificial-intelligence calculations, and cybersecurity features. The chip also includes functions that assist with encryption and decryption, tasks that are particularly punishing for microprocessors to perform.

“It’s the most advanced processor we’ve ever built,” Navin Shenoy, executive vice president of Intel’s Data Platforms Groups, told Barron’s. “It’s delivering nearly 50% performance improvement, generation to generation on a range of workloads.”

The new generation of sever chips arrive as Intel has lost share in that market to Advanced Micro Devices (AMD) in recent months. According to data from Mercury Research, AMD gained 2.6 percentage points to capture 7.1% of the server market in the fourth quarter, not counting devices that are part of the so-called internet of things. Intel’s share declined.

Several sell-side analysts, such as Raymond James’ Chris Caso, wrote that despite Intel’s performance improvements, the gap between its chips and AMD’s remains significant.

Credit Suisse analyst John Pitzer, though, is upbeat about the stock. He wrote in a note to clients Wednesday that his team sees Intel as the most undervalued, mispriced stock amid a growing demand for computing power.

Pitzer’s target for Intel’s stock price is $80, the seventh highest on Wall Street. The average call is $68.01, which implies a return of roughly 3%. Of the analysts that cover Intel, 19 rate it a Buy, 16 have it at Hold, and 10 suggest selling shares.

Intel’s latest server chips arrive amid a global chip shortage, spurred in part by manufacturing shutdowns related to the Covid-19 pandemic. Shortages have occurred across a range of industries, including autos and appliances, as chips are increasingly used in more products.

“I’ve been saying internally that I think we’re headed for the biggest build out of computing infrastructure in human history,” Shenoy said.

Pitzer wrote that investors should closely watch the debut of Intel’s next-generation Sapphire Rapids chip. Sapphire Rapids uses Intel’s second-generation 10-nanometer manufacturing technique, and is the first product to “fully” combine several distinct semiconductors into a single package. Sapphire Rapids is set to launch in the second half of this year. Shipments in significant volumes are due to begin in 2022.

Intel stock gained 13% in the past year, as the Sox surged 106%. The S&P 50 0 index rose 53% in the same period.

Write to Max A. Cherney at max.cherney@barrons.com