July 31, 2023: On Thursday, Intel reported stronger-than-anticipated results for the second quarter, beating on the top and bottom lines. It was a welcome glimmer of hope for analysts and investors as the company struggled in the preceding quarters to clear inventory and retool for artificial intelligence-centric, GPU-heavy corporate spending. Shares of Intel were up about 5% on Friday.

Wall Street analysts cheered the results, primarily driven by PC sales, but cautioned that the company had larger issues that would offer significant headwinds.

“Good results,” Citi analyst Christopher Danely stated, “but structural issues remain.” Citi reiterated a impartial rating and a $34 price target.

“We expected spending on Nvidia GPUs to come at the expense of Intel and AMD CPUs, and Intel stated the data center market will be weak for a while. In addition, Intel restarts to chase growth in markets where we think it will not achieve, such as foundry and graphics,” Danely wrote.

Deutsche Bank, which described Intel’s numbers as “more than marginal,” maintained its Hold rating but boosted its price target from $32 to $38, noting “abated” inventory challenges. But the company will likely face continued pressures with corporate spending shifting toward AI, Deutsche Bank analyst Ross Seymore said.

JPMorgan, meanwhile, maintained an underweight rating on the stock, the match of a sell. Analysts increased Intel’s price target from $30 to $35 and lauded the organization’s “better-than-expected results. But, JPMorgan noted, while continued execution improvement was a positive signal, improving production and shipments of server- and client-side products would be the next challenge.

Intel CEO Pat Gelsinger said on a call with analysts the company still sees “persistent weakness” in all parts of its business through year-end and that server chip sales won’t recover until the fourth quarter. He also said cloud organizations focused more on securing AI graphics processors than Intel’s central processors.