Intel (NASDAQ: INTC) is experiencing an unexpected boost in demand for its older-generation chips due to the ongoing Sino-U.S. trade war, which threatens the company’s revenue from China, its largest market. The trade conflict, combined with rising economic uncertainty and the potential for higher tariffs, is prompting customers to turn to more affordable, older processors.
Michelle Johnston Holthaus, Intel’s head of products, noted during a conference call on Thursday that both the personal computer and data center markets are showing strong demand for Intel’s older chips. “Macroeconomic concerns and tariffs have everybody hedging their bets,” Holthaus explained.
Intel’s first-quarter results surpassed Wall Street expectations, as customers rushed to stockpile chips in anticipation of tariff increases. However, the company has issued a cautious outlook for the second quarter, with concerns over escalating trade tensions.
Although President Donald Trump has temporarily exempted chips from U.S. tariffs, Intel still faces the threat of retaliatory tariffs from China. These could lead to levies of 85% or higher on U.S.-made chips, based on a recent notice from the China Semiconductor Industry Association.
David Zinsner, Intel’s finance chief, expressed worries about the impact of trade uncertainty. “The very fluid trade policies in the U.S. and beyond, as well as regulatory risks, have increased the chance of an economic slowdown with the probability of a recession growing,” Zinsner said. He also warned that higher tariffs would lead to increased costs for the company.
The tariffs could hinder a recovery in the PC market, potentially affecting Intel’s efforts to drive demand with new AI-focused chips and a new Microsoft (NASDAQ: MSFT) Windows cycle. Analysts are concerned that demand for older chips may signal economic unease, with customers opting for “good enough” solutions in a volatile climate.
Michael Ashley Schulman, chief investment officer at Running Point Capital, observed that in such uncertain times, older-generation chips are seen as a safer choice. “In a shaky economic climate, ‘good enough’ beats bleeding edge,” he said.
The growing preference for older chips, while beneficial in the short term, may hurt Intel’s long-term prospects. Bob O’Donnell, chief analyst at Technalysis Research, warned that the reliance on lower-priced older processors could slow the adoption of more advanced chips for AI-powered PCs, ultimately affecting Intel’s bottom line.
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