NEW YORK (Dow Jones)–Shares of Nvidia Corp. (NVDA) and Advanced Micro Devices Inc. (AMD) jumped Monday following news semiconductor giant Intel Corp. (INTC) is canceling its first chip based on a design known as Larrabee.
The high-profile product, which Intel has been publicly discussing since April 2007, was expected to generate complex graphics for video games and carry out other high-performance computing chores. Intel already makes less-sophisticated graphics circuitry that is integrated into sets of chips.
Larrabee has been a hot topic in the computer industry, in part because the technology threatened to open a new front in Intel’s competition with Nvidia and AMD. The two companies lead the market for high-performance graphics chips, often sold in cards that plug into personal computers.
“A lot of concern regarding Nvidia of late was that Intel was going to come out with this in the next few quarters and take big chunks of market share,” Raymond James analyst Hans Mosesmann said. “With the cancellation of the project, the weight on Nvidia [and AMD] is pushed out into sometime in the future.”
And ThinkEquity analyst Vijay Rakesh said Intel’s postponement is a “lifeline and a potentially big shot in the arm near term” for Nvidia.
Representatives from Nvidia and AMD weren’t immediately available to comment.
In recent trading, Nvidia shares jumped 13.18% to $16.14, doubling year-to-date. AMD climbed 7.6% to $8.46, nearly quadrupling since the beginning of the year. Intel shares, meanwhile, slipped 9 cents to $20.37 as analysts said the news wasn’t completely unexpected.
“In our view, the market has suspected Intel was struggling with Larrabee and we see it as prudent for management’s announcing at least a delay from the original 2009/2010 launch,” Thomas Weisel analyst Kevin Cassidy said in a note.
And Deutsche Bank analyst Ross Seymore said Larrabee was unlikely to drive meaningful upside for Intel.
Raymond James’ Mosesmann agreed, saying the news isn’t going to impact Intel this quarter or even next year.
“Strategically, it is a black eye for them,” Mosesmann said, adding that Intel will eventually get it right. “This is more positive in the near term for Nvidia and AMD [than it is negative for Intel]. It gives them a couple more years to be a duopoly.”
He added that graphics technology is very complicated and is starting to change general-purpose computing, with people using graphics hardware to run everyday multimedia files or applications.
“If even Intel, with its resources and know-how, is struggling, it tells there’s something special that AMD and Nvidia have going on,” Mosesmann said.
