Sometimes, markets understand and price in good news that changes investor perceptions about a company pretty quickly. A blowout earnings report is a good example, as is something like the Netflix (NFLX) price hike that was announced on Oct. 5. Other times, the change in attitudes is a more gradual process.
What’s gone on with Intel Corp. (INTC) over the last three months is a good case in point. As of July 3, Intel was down 8% for the year, held back by worries about PC demand, stiffer competition from AMD Inc. (AMD) and slower-than-expected server CPU sales growth. But since then, they’ve risen 18%, outpacing the Nasdaq’s 8% gain over the same time frame and hitting their highest levels since the dotcom bubble.
A solid Q2 report (released on July 26) has helped Intel’s cause, but it’s worth remembering that shares rose less than 1% the day after the report came out. Instead of a “Eureka” moment happening, it seems as if investors have slowly changed their attitudes on the prospects for Intel’s PC and server CPU businesses, thanks to both improving demand and compelling product launches.
On the server side, the July 11 launch of Intel’s comprehensive and well-engineered Xeon Scalable processor line (codenamed Purley) has helped, and so have giant server orders from cloud giants. On the PC side, Intel has benefited from healthy gaming PC and high-end notebook demand — reflected in the company’s Q2 numbers — as well as product launches that have left markets more confident that the company can keep AMD’s Ryzen CPU line from doing too much damage.
On Aug. 21, Intel launched the first 8th-generation chips for its mainstay Core PC CPU line. Specifically, it unveiled four chips for its U-series family of notebook CPUs meant for thin-and-light systems such as ultrabooks and notebook/tablet convertibles. With the chips sporting four CPU cores — twice as many as are found within 7th-gen U-series chips — and various architectural, design and manufacturing process improvements, Intel claimed a 40% performance gain relative to 7th-gen chips when running the SYSmark 2014 SE benchmark. They also claimed that battery life was largely unchanged. AMD share slumped following the news.
On Sep. 25, Intel followed that up by launching its first six 8th-gen desktop CPUs. Whereas the first 8th-gen notebook chips are based on the Kaby Lake CPU architecture that Intel previously used for 7th-gen parts, the new desktop chips are based on Kaby Lake’s successor, Coffee Lake.
The lineup is accompanied by a new motherboard chipset (the Z370, succeeds the Z270) meant for relatively powerful systems, and includes the $359 Core i7-8700K, which — though not packing as much raw horsepower as the costly Core i9 CPUs Intel has rolled out for workstation users and content creators — is touted by Intel as its best-ever gaming CPU. AMD, whose Ryzen 7, 5 and 3 desktop CPU lines (launched earlier this year) have put it on much better competitive footing with Intel, once more sold off.
As is the case for the first 8th-gen notebook chips, the desktop Coffee Lake chips pack more cores than comparably-priced 7th-gen parts. Also similar is the fact that the 8th-gen chips tend to feature lower base clock speeds for their CPU cores, but often have higher turbo clock speeds and tend to feature larger on-chip caches.
The four most powerful chips in the lineup (including the 8700K) contain six cores, two more than their predecessors. In addition, Intel is rolling out the first chips for its relatively cheap Core i3 desktop family to contain four cores rather than two, the $168 i3-8350K and $117 i3-8100. A “K” designation for a chip means that users can overclock it.
Reviews have been quite solid. Though some reviewers noted performance might not be that great for workloads that can’t take advantage of the extra cores and threads the Coffee Lake chips provide, benchmarks were pretty strong otherwise. PC Gamer’s CPU performance tests turned up an average 31% lead for the i7-8700K relative to its predecessor, the i7-7700K, and a 13% lead relative to AMD’s comparably-priced Ryzen 1700X. It also slightly outperformed AMD’s more costly Ryzen 1800X CPU.
And though GPUs have a larger impact on gaming performance than CPUs, gaming benchmarks also turned up performance leads. On average, PC Gamer’s 1080p gaming tests — they relied on Nvidia Corp.’s (NVDA) high-end GeForce 1080 Ti GPU — gave the 8700K had a 7% edge on the 7700K, and a 23% edge against the Ryzen 1700X. One caveat: 1080p gaming has been a soft spot for the Ryzen line. Its numbers haven’t been as bad for benchmarks involving higher resolutions.
Regardless, Intel’s 8th-gen launches have clearly thrown the gauntlet down for AMD. In the absence of meaningful price cuts, the recent momentum seen for AMD’s Ryzen desktop line is bound to slow. And the quality of Intel’s 8th-gen U-series chips also raises questions about how competitive AMD’s upcoming Ryzen Mobile notebook processors will be — particularly since battery life, a long-time Intel selling point, also matters here.
Taiwan’s Digitimes recently reported Coffee Lake notebook CPUs for Intel’s H-series processor line (meant for gaming and workstation systems) will arrive in Q1 2018, and be followed by U-series and additional H-series chips in Q2. AMD, for its part, is set to counter with Ryzen chips relying on a new 12-nanometer manufacturing process from supplier Globalfoundries (they’ll reportedly start arriving in February). And in 2019, the company is expected to launch chips based on a 7-nanometer Globalfoundries process.
But Intel isn’t standing still, either: Chips based on the company’s Cannon Lake architecture, the first PC CPUs to rely on Intel’s 10-nanometer process, are still expected at some point in 2018; sources tell Digitimes low-power (Y-series) Cannon Lake notebook chips will arrive in June or July 2018. And Cannon Lake will be followed (quite possibly in the first half of 2019) by Ice Lake, an architecture that Intel is already eager to promote.
Both AMD and a resilient high-end PC market might deserve credit for lighting a fire under Intel, which in 2016 often talked about its PC CPU operations as if they were a legacy business. By any standard, much of the company’s PC CPU lineup looks far more attractive now on a price/performance basis than it did at the start of the year. And markets certainly haven’t failed to take notice.