July 27 (Reuters) - Intel Corp shares fell more than 6 percent on Friday, after the chipmaker’s upbeat results were overshadowed by concerns that Advanced Micro Devices Inc may be chiseling off market share from its high-margin data center business.
The company’s profit and revenue beat Wall Street targets, but double-digit growth in its data center chip business fell short of analysts’ expectations and disappointed investors.
“Intel stock continues to be under pressure as investors are looking past near term outperformance and struggling with the storyline of potential future share loss to AMD,” Barclays analysts said.
Intel was at the forefront of selling chips used in making servers where data is stored remotely or in so-called cloud servers. Over the past few years as more companies rushed to the cloud to move data online, Intel enjoyed healthy gains.
Amazon, which beat profit estimates on Thursday due to its cloud business, and Microsoft have been the main beneficiaries of the cloud adoption.
Intel’s Xeon family of server chips had a near-monopoly of the market, but started to face competition last year after smaller rival AMD re-entered the server business after a decade with EPYC 7000 series processors that earned positive reviews.
EPYC chips outperformed Xeon in certain tasks and provided better performance-per-dollar than what Intel chips offered, according here to tests done by Anandtech after the launch last year.
While AMD currently has a small share of the server business, a loss of market share will hamper Intel’s plans to focus on data centers to diversify away from stagnating PC business, where it is the market leader.
AMD shares are up 5 percent at $19.32 in early trade. Intel shares were trading down at $48.75.
“We see the stock as increasingly binary around their ability to hold off AMD in the data center,” Morgan Stanley analysts said of Intel. “We don’t see the stock outperforming if AMD successfully takes 3-4 points of server market share in the next 2 quarters and gets to 10% by the end of next year.”
At least four brokerages cut their price targets on Intel stock, while six brokerages had raised their targets on AMD stock after it reported strong quarterly results earlier this week, mainly due to high demand for server chips. (Reporting by Supantha Mukherjee in Bengaluru; Editing by Bernard Orr)