Intel sees ‘green shoots’ in chip market, shares rally on optimistic 2023 outlook

The company predicted that gross margins – a closely watched measure – would begin to widen again in the back half of 2023. Intel is returning to full manufacturing capacity, as an inventory glut afflicting the personal computer market is nearing an end, executives said on a conference call on Thursday. The upbeat remarks helped send Intel shares up more than 6 per cent in late trading after an earlier decline.

“You normally have a stronger second half in our industry, and we expect that to be the case,” chief executive officer Pat Gelsinger said on the call. “We’re seeing some green shoots in the marketplace. But we think it’s a tough market for all.”

The company also painted a more optimistic view of the broader PC industry, saying it expects shipments to reach 270 million units this year before increasing to about 300 million units annually in the future.

Gelsinger is confronting a massive pile-up of inventory, weak demand and the loss of market share – all of which contributed to a historic slump. At the same time, he is trying to speed up the introduction of new production technology, a costly attempt to regain Intel’s industry leadership. But that effort – if successful – will not bear fruit until 2025.

Investors have been sceptical that the chip maker can catch up with rivals, and the stock plunged nearly 50 per cent last year. On Thursday, Gelsinger argued that the company has begun to turn a corner.

“In the things that they can control, they’ve lived through the worst of that pain,” said Cody Acree, an analyst for Benchmark Co.

In the near term, Intel’s financial outlook still looks dim. It expects a loss of 4 cents a share in the second quarter, excluding some items, the company said. That compares with the 2-cent average estimate of analysts.