Intel Receives Stamp of Approval From Nvidia CEO

Intel, which once dominated PC chip making, has been struggling to regain its footing. 

The company has fallen behind rivals like AMD and Nvidia, which has made a specialty of high-end chips. 

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Now though, Intel has gotten some good news as Nvidia’s  (NVDA) – Get Free Report CEO Jensen Huang said he was “open” to working with the chipmaker.

Huang said Intel INTC, which manufactures chips, could be an option in addition to using ones made by Taiwan Semiconductor Manufacturing Co. (TSMC)  (TSM) – Get Free Report.

Huang said he is confident in Taiwan’s supply chain and will continue to use chips made by Taiwan Semiconductor Manufacturing Co. despite recent military threats by China. He also said on May 30 in Taiwan that diversification of the supply chain is critical to the future of Nvidia.

Taiwan has faced growing military threats by China and is home to several key chip makers. 

“We have a lot of customers depending on us. And so our supply chain resilience is very important to us. We manufacture in as many places as we can,” Huang said at the Computex 2023 conference. 

“We’re open to manufacturing with Intel,” he said. “And (Intel CEO) Pat (Gelsinger) has said in the past that we’re evaluating their process, and we’ve recently received the test chip results of their next generation process and the results look good.”

Shares of Intel have risen by 14.03% during the past five days as investors are upbeat about its potential earnings.

Intel is expanding its foundry business, including the construction of a new plant in Ohio.

Supply chain issues remain critical to Nvidia and the company’s current supply chain is “designed for maximum diversity and redundancy so that we can have resilience,” Huang said.

Nvidia’s suppliers include TSMC and Samsung Electronics Co. Ltd.

Intel’s CFO David Zinsner said Intel’s role in the artificial intelligence industry will be providing higher performance chips to its cusomers.

“We are very good on the high-performance compute side,” he said on May 31 at a TD Cowen conference. “That’s where we think we can leverage the best of our product offerings in foundry.”

The company “will be able to ride the wave of AI, not only on the product side, but also on the foundry side by providing wafers to those customers that have products that address the AI market,” he added.

Intel reported a narrower-than-expected first-quarter loss and forecast improving profit margins over the second half of the year.

For the three months ending in March, Intel also posted an adjusted loss of 4 cents per share, which is less than Wall Street‘s 15 cents per share loss forecast, with revenue of $11.72 billion.

Client computing revenue dropped by 38% from last year to $5.8 billion, Intel said. Its data center and AI division saw sales slump by 39% to $3.7 billion. Network and Edge Group sales fell 30% to $1.5 billion.

Intel estimates revenue of around $12 billion over the three months ending in June, which is ahead of Street forecasts. The company said it would likely report an adjusted loss of 4 cents per share for the quarter.

Narrower margins in PC chips are expected. Intel is the market leader in PC chips, but data center demand is also lagging amid a glut in global inventories. Intel’s gross margin for the first quarter was 34.2%, nearly half of the chipmaker’s long-term target of around 60%, with a forecast for 33.2% over the three months ending in June.

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