×
Pro Analysis

Intel downgraded by Jefferies on concern it's ‘chasing’ new markets after self-driving chipmaker buy

 model demostrates Intel's Project Alloy, an all-in-one merged reality headset during an Intel press event for CES 2017 at the Mandalay Bay Convention Center on January 4, 2017 in Las Vegas, Nevada.
Getty Images

A flurry of dealmaking by Intel is masking slowing growth for its data center unit, which is facing stiff competition from Nvidia, said Jefferies, which downgraded the chipmaker to hold from buy.

"INTC's use of cash for M&A makes us wonder if the market is drifting away from x86," said Jefferies analyst Mark Lipacis on Monday in a note titled "Chasing New Markets."

X86s are a variety of CPUs that are manufactured by Intel and its competitors.

The analyst noted that revenue for Intel's Data Center Group has slowed. The division's revenue grew only 8 percent in the fourth-quarter of 2016, down from 11 percent growth, year-over-year.

"The bar is low, but we think its P/E multiple drifts down," added Lipacis.

Intel announced on Monday that it will acquire the Israeli self-driving technology firm Mobileye for $15.3 billion, at $63.54 per share, representing a 34 percent premium to Mobileye's closing price of $47.27 on Friday.

The deal comes after the chip giant completed its acquisition of Altera back in Dec. 2015 for $16.7 billion, as well as acquisitions of smaller firms Movidius and Nervana in late 2016.

Shares of Mobileye were up over 28 percent on Monday, while Intel traded down about 2 percent.

Mobileye shares 5-day performance

Intel shares 5-day performance