00:00 Speaker A
Great results. Well, we’re starting to see this company’s profitability decline over time. Let’s call this the minimum profit level. And I actually think what we’re excited about is that momentum that we continue to see over the next few years.
00:19 Speaker B
What do you think the PC market will look like in the coming quarters? The rising price of memory chips is driving up the price of desktops and laptops, raising questions about how that will affect demand. How is Intel getting through this situation?
00:44 Speaker A
Well, you know, we’re going to see a negative impact into the second half of this year. It will be interesting to hear from them on the conference call here as far as the outlook for PC over the next few quarters. Well, we’re not necessarily looking for much from that side. I think this will be a difficult field. Um, but again, it’ll be interesting to see what they say on the volume side, but in our view, um, this is going to continue to be determined by the momentum and potential of the data center, not to mention the momentum that we’re seeing from a price standpoint.
01:21 Speaker A
As we continue to deliver these agent AIs, we will likely see more compute-intensive and CPU-intensive inference. Therefore, this will be a positive trend for Intel not only in the next few quarters but also over the next 3-5 years.
01:43 Speaker B
If you were bullish, how would you tell your customers this is a buy? How would you characterize valuation here?
01:53 Speaker A
Well, when you look at the valuation, it doesn’t mean much. And, um, actually, this is probably the first sentence of our final research note. On the surface, that doesn’t make any sense. If you believe the margin story can continue to expand, and we believe that too, take a look at Taiwan Semi’s gross margins this year are expected to be in the mid-60s, around 66%. Looking at AMD’s margins, we expect them to be in the mid-high 50s over the next 12 to 18 months.
02:20 Speaker A
And Intel, in many ways, is kind of a hybrid of those two companies. Let’s look at the next two to three years, not necessarily the next 12 months. You know the earning power they can get from margins that start to gravitate towards that level. You don’t even have to reach those levels. You’re talking about potentially much more than $5 in revenue. So at that point, the earnings make sense, but now you need to own the stock
02:44 Speaker A
This is in anticipation of an improved margin trajectory going forward. This is why we continue to recommend it as a buy, and why we don’t think the valuation is as dire as it seems.
