Another Intel product delay drags on chip stocks, Dow

In a Tuesday-dated blog post, Intel’s Lisa Spelman, who heads the chip maker’s Xeon and Memory Group, said Sapphire Rapids chips are expected to be in production in the first quarter of 2022 with a increase in the second quarter.

Last year, Intel had forecast its 10-nanometer Sapphire Rapids would come out some time in 2021, about a month after it announced a delay of its generation of 7-nanometer chips out to at least late 2022. In chip parlance, nanometers, or nm, refer to the size of the transistors that go on a computer chip, with the general rule being that smaller transistors are faster and more efficient in using power.

In January, then-incoming Intel Chief Executive Pat Gelsinger started addressing the 7-nm chip delay, and in March announced aggressive plans to build out Intel’s manufacturing capabilities.

In a note titled, “Do you want to hear the good news or the bad news
first?” Bernstein analyst Stacy Rasgon speculated on why Intel was making this announcement because he couldn’t “imagine the company would do this unless it was necessary.” Rasgon has an underperform rating on Intel and a $43 price target.

“One possible explanation could be the one the company appears to be trying to make, namely that demand for the new features is strong and they need time to get it right, and that customers will be (apparently) happy to deal with the delayed road map to get those features,” Rasgon said.

“A less charitable explanation however is that the company’s competitive positioning is worsening, and that the downside associated with delaying Sapphire Rapids (both for the products and, it should be said, for the stock) is perceived by management to be less that what would be experienced by launching earlier with a less competitive product,” the Bernstein analyst said.

Wells Fargo analyst Aaron Rakers, who has an equal weight rating and a $70 price target on Intel, said the announcement was “an incremental positive” for Advanced Micro Devices Inc. AMD, +2.65%, which he rates as overweight.

Of the 40 analysts who cover Intel, 14 have buy ratings, 16 have hold ratings, and 10 have sell ratings, along with an average target price of $64.98, according to FactSet data.

At last check, Intel shares were down 1.3%, while the PHLX Semiconductor Index SOX, +0.37% was up 0.5% and the Dow was up 0.1%.

Shares of AMD, which have benefited in the past from Intel delays, were up 3.4%. Back in April, AMD showed its data-center sales had more than doubled, while Intel ‘s had fallen 20%.