What happened
Shares of Intel (INTC +0.09%) jumped on Wednesday along with the major stock market indices. While there was no company-specific news, a solid earnings report from Advanced Micro Devices (AMD +0.81%) may be helping the cause. Shares of Intel were up 5.4% at 3:35 p.m. EDT.
So what
While AMD stock slumped following its in-line first-quarter report, some commentary from management regarding the server chip business may be giving Intel investors reason to be optimistic about data center demand.
Image source: Intel.
AMD's server chip unit sales rose by a double-digit percentage from the fourth quarter, and they tripled on a year-over-year basis. Some of that growth was likely due to market share gains from Intel, but certainly not all of it. AMD pointed to strong demand from cloud providers as they accelerated their infrastructure deployments to deal with rising demand.
Intel's first-quarter report last week featured similar strength in the data center business. Intel's data center group revenue soared 43% to $7 billion, driving both total revenue and earnings higher. Intel has a dominant market share in the server chip market, shipping more than 95% of x86 server chips in the fourth quarter of last year.
Now what
Intel is losing market share to AMD in data centers, and that trend is likely to continue. AMD's server products are now highly competitive with Intel's offerings, giving customers a viable non-Intel option. However, demand for server chips grew fast enough in the first quarter for Intel to post impressive growth despite losing share.
Looking ahead, it's unclear whether strong demand in data centers will persist. The U.S. is likely in a recession, and data center customers may begin to pull back on orders in the coming months due to economic uncertainty. In the cloud computing market, the big cloud infrastructure providers may start to have problems with customers being unable to pay their bills, which could prompt a slowdown in capital spending.
While the future is highly uncertain for the chip giant, strong data center demand right now appears to be a good enough reason for investors to bid up the stock.
