When Intel Corporation (Nasdaq: INTC) disclosed two major security vulnerabilities in its chips last week, the company said neither issue would put its market share at risk. Unfortunately for Intel investors, at least a handful of Intel customers are now considering a switch to Intel’s primary competitors.
According to Reuters, Intel cloud customers Cloudfare, Blackblaze and Infinitely Virtual are considering switching from Intel to ARM Holdings or Advanced Micro Devices (AMD) chips.
The first of the two vulnerabilities Intel disclosed last week, referred to as “Meltdown,” impacted only Intel chips. The second vulnerability, called “Spectre,” affected chips made by Intel, ARM, AMD and Nvidia Corp. (NVDA).
Intel was quick to patch the vulnerability via software updates, but Microsoft Corp. (MSFT) said on Tuesday that the patches could have a meaningful impact on server speed. Microsoft said PC users using Windows 7 and Windows 8 with older chips will experience noticeable performance impact from the patches. In addition, Microsoft said Windows 10 users on PCs with Intel Haswell chips or older model chips will notice the impact as well. Microsoft said its server operating system, Windows Server, will experience an even larger performance reduction from the patch.
Intel has previously said fixes for the two issues should reduce processing speed by 5 percent or less for the average user. On Tuesday, Intel said it is still evaluating performance changes. IDC estimates Intel chips are currently used in 98 percent of data center systems.
Intel has been downplaying the impact Meltdown and Spectre will have for the company, but analysts aren’t necessarily convinced.
“There is some possibility, absolutely, that AMD will gain some business in the data center,” CNBC analyst Jim Cramer said last week.
Mizuho analyst Vijay Rakesh says Intel’s customers may not be as forgiving as the company anticipates. “While INTC does not see a financial or market share impact from the security issue and performance degradation with the vulnerability, we believe its high-performance customers might have a different take,” Rakesh says.
Credit Suisse analyst John Pitzer says even if the two issues have a negligible impact, Intel stock is still not “particularly compelling” from a value perspective.
“It is…
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