Shares of Intel (INTC +1.15%) climbed right from the start on Monday, rising as much as 3.7%. As of 12:41 p.m. ET, the stock was still up 3.5%.
The catalyst that drove the semiconductor company higher were comments by a Wall Street analyst about the state of the chip industry.
NASDAQ: INTC
Key Data Points
A potential opportunity
News emerged late last week that Nvidia was creating a business segment to design customized processors for cloud computing and artificial intelligence (AI), as first reported by Reuters. This comes in the wake of an "exploding market for custom AI chips," and is seen as a defensive move to maintain its market dominance, according to the report.
After reviewing the landscape, analysts at Bank of America concluded that, while the move could have longer-term competitive implications for rival chipmakers, it likely won't have any near-term impact.
While the report didn't specially address Intel, the analysts said they "won't be surprised" if Intel Foundry Services (IFS) emerged "in the mix as a potential alternative to foundry leader" Taiwan Semiconductor Manufacturing to create these customer processors.
The AI gold rush has only just begun
The first wave of AI chips has primarily been focused on computing performance, but some users are beginning to consider the costs. The next wave of innovation will likely have an emphasis on power consumption and optimization, potentially lowering the cost of AI and putting it within reach of businesses with more modest budgets.
Intel has audacious goals for its foundry business, with plans of "becoming the world's second-largest foundry by 2030," according to Stuart Pann, Intel's senior vice president and general manager of IFS.
Furthermore, it's estimated that the custom chip market topped $30 billion in 2023, representing roughly 5% of annual global processor sales, according to Needham analyst Charles Shi (via Reuters).
After seeing their shares remain rangebound for the past five years, Intel investors are hoping the chipmaker can parlay its experience and the ongoing demand for AI into profits, but its history of success is mixed. That said, considering the magnitude of opportunity, the stock certainly bears watching.
