Read through of key customer’s 4Q23 results
- We maintain our view of a pushout in the key customer’s backend capex spend into late 2024
- Key customer Intel 4Q23 delivers a clean beat to consensus estimates
- The share price is likely to remain range bound for now due to the lack of strong catalysts and overhang from the inventory shortfall incident
- Maintain HOLD with TP S$3.00
We maintain our view of a pushout in the key customer’s backend capex spend into late 2024 given the lacklustre forecast. Intel’s subdued guidance reveals that a comeback could be slower than expected. 1Q24 revenue guidance of $12.2-13.2b came in below estimates of $14.2b and EPS guidance of $0.13 was also below the $0.33 expected by consensus. The PC market continues to show promise with low single digit TAM growth in 2024 while the outlook for data centre in 1Q looks relatively bleak given the ongoing competitive pressures and a shift in wallet share toward accelerators. Intel is also seen as an AI laggard compared to Nvidia and AMD. Recovery in utilisation rates of testers could hence be protracted, which pushes out capex spend into late 2024. We also note that Intel’s overall gross capex could rise in 2024 however we believe that it could be primarily due to IDM 2.0 capital investments rather than backend capex spend, a key driver for AEM. We believe that AEM’s share price is likely to remain range bound for now due to the lack of strong catalysts and overhang from the inventory shortfall incident.
Key customer Intel 4Q23 delivers a clean beat to consensus estimates. Revenue of $15.4b (+10% yoy) came in above the street’s forecast of $15.2b. The CCG (client computing group) segment which accounts for more than half of Intel’s revenue, was up 33% yoy on a greater alignment in sell in and sell through rates. DCAI (data centre and AI), accounting for c.30% of the business, was down 10% yoy owing to a contraction in CPU TAM and continued competitive pressures. Non-GAAP EPS of $0.54 (+260% yoy) also surpassed analysts’ estimates of $0.45, led by a recovery in gross margins of 5 ppts and OpEx discipline.