As the Q2 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the processors and graphics chips industry, including Intel (NASDAQ:INTC) and its peers.
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
The 9 processors and graphics chips stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 0.9% while next quarter’s revenue guidance was 12.9% below.
Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.
While some processors and graphics chips stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 2.3% since the latest earnings results.
Intel (NASDAQ:INTC)
Inventor of the x86 processor that powered decades of technological innovation in PCs, data centers, and numerous other markets, Intel (NASDAQ: INTC) is the leading manufacturer of computer processors and graphics chips.
Intel reported revenues of $12.83 billion, flat year on year. This print fell short of analysts’ expectations by 1.1%. Overall, it was a softer quarter for the company with underwhelming revenue guidance for the next quarter and a decline in its operating margin.
“Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones. Second-half trends are more challenging than we previously expected, and we are leveraging our new operating model to take decisive actions that will improve operating and capital efficiencies while accelerating our IDM 2.0 transformation,” said Pat Gelsinger, Intel CEO.
Intel Total Revenue
Unsurprisingly, the stock is down 19.5% since reporting and currently trades at $23.43.
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ:NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Nvidia reported revenues of $30.04 billion, up 122% year on year, outperforming analysts’ expectations by 4.5%. The business had an exceptional quarter with a significant improvement in its inventory levels and an impressive beat of analysts’ EPS estimates.
Nvidia Total Revenue
Nvidia achieved the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems happy with the results as the stock is up 5.2% since reporting. It currently trades at $132.14.
A global leader in its category, Lattice Semiconductor (NASDAQ:LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.
Lattice Semiconductor reported revenues of $124.1 million, down 34.7% year on year, falling short of analysts’ expectations by 4.7%. It was a disappointing quarter as it posted underwhelming revenue guidance for the next quarter and a decline in its operating margin.
Lattice Semiconductor delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 5.4% since the results and currently trades at $51.98.
Formed by the merger of TriQuint and RF Micro Devices, Qorvo (NASDAQ: QRVO) is a designer and manufacturer of RF chips used in almost all smartphones globally, along with a variety of chips used in networking equipment and infrastructure.
Qorvo reported revenues of $886.7 million, up 36.2% year on year. This print beat analysts’ expectations by 4.1%. Overall, it was a strong quarter as it also recorded an impressive beat of analysts’ EPS estimates and a significant improvement in its operating margin.
The stock is down 15% since reporting and currently trades at $101.50.
Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm (NASDAQ:QCOM) is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.
Qualcomm reported revenues of $9.39 billion, up 11.1% year on year. This result beat analysts’ expectations by 1.9%. Overall, it was a strong quarter as it also logged a decent beat of analysts’ EPS estimates and strong sales guidance for the next quarter.
The stock is down 5.9% since reporting and currently trades at $170.17.
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