Intel shares fall after small Wall Street firm downgrades chipmaker, predicting slower growth

  • Northland Capital Markets lowers its rating to underperform from market perform for Intel shares, citing rising competition from AMD and Nvidia.
  • The firm predicts Intel's sales growth in its data center segment will drop to 20 percent in its third quarter and fall to 11 percent in its fourth quarter.
Attendees view the Acer Switch 7 laptop computer powered by the Intel Corp. i7 processor at the company's booth during the 2018 Consumer Electronics Show (CES) in Las Vegas.
David Paul Morris | Bloomberg | Getty Images
Attendees view the Acer Switch 7 laptop computer powered by the Intel Corp. i7 processor at the company's booth during the 2018 Consumer Electronics Show (CES) in Las Vegas.

Intel's sales growth in the data center market will slow this year, according to a small Wall Street firm.

Northland Capital Markets lowered its rating to underperform from market perform for Intel shares, citing rising competition from AMD and Nvidia.

"Workloads in Data Centers are shifting to AI. This we believe is increasing the use of GPU [made by AMD and Nvidia] and ASICs and reducing the importance of CPUs," analyst Gus Richard said in a note to clients Monday. "We expect server growth to slow in Q3. … After Q2 earnings no clear catalyst this year."

The company's shares closed down 3.4 percent on Monday.

Richard reduced his price target for Intel shares to $45 from $53, representing 18 percent downside to Friday's close.

The analyst predicts Intel's sales growth in its data center segment will peak at 25 percent in its second quarter, then drop to 20 percent in its third quarter and fall to 11 percent in its fourth quarter.

"In our opinion, process is critical in driving product leadership in the x86 market. AMD is moving to TSMC at 7nm, and it has access to a competitive 14nm process today," the analyst said. "We expect that AMD will sample a 7nm server CPU in 2H:18 and move into production in 2019 likely in lock step or slightly ahead of INTC."

Intel sent the following statement for this story:

"We see significant opportunities for growth in the data center – an estimated $70 billion market opportunity by 2021 where we have an opportunity to grow our total silicon datacenter market segment share from where we are today. To win, we will continue our history of CPU leadership and deliver the broadest portfolio of products that, when combined, change the basis of competition in the data center.

While we are prepared for a more competitive environment as we move through 2018, we've already factored that into our financial forecast and we're in a great position to compete. We remain very confident in our products, our roadmap and our competitive position. For example, Intel Xeon processor Scalable family represents the biggest advancements in platform capabilities in a decade, and later this year we'll introduce breakthrough new Intel Optane DC persistent memory and storage technology architected specifically for the data center."

— CNBC's Michael Bloom contributed to this story.