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Intel Shares Reach Two-Decade High After Blasting Q4 Earnings Forecasts

An 'insatiable appetite for data' will drive data center chips sales this year, Intel CEO Robert Swan predicts, following stronger-than-expected fourth-quarter earnings for one of the semiconductor sector's key players.

Intel Corp.  (INTC) - Get Intel Corporation (INTC) Report shares opened at the highest levels in nearly two decades Friday after the semiconductor maker topped Wall Street's fourth quarter earnings forecast and predicted robust 2020 sales amid an emerging rebound in global chip markets.

Intel said non-GAAP earnings for the three months ending in December rose 18.8% to $1.52 per share, smashing the Street consensus forecast of $1.25 as overall revenues rose 8% to $20.2 billion, topping analysts' estimates of a $19.2 billion tally.

Intel also forecast 2020 sales of around $73.5 billion, citing a increases in chip purchases from 'hyperscale' cloud providers adding chips to the growing data centers. 

With forecast-topping earnings from Apple  (AAPL) - Get Apple Inc. (AAPL) Report suppliers such as Taiwan Semiconductor  (TSM) - Get Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR Report and STMicroelectronics  (STM) - Get STMicroelectronics NV ADR RegS Report, as well as Intel's robust forecast and solid quarterly earnings from auto-focused Texas Instruments  (TXN) - Get Texas Instruments Incorporated Report. clear signals are starting to emerge from the chip sector that suggest the long-awaited rebound in global demand has finally materialized. 

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"When we look at 2020 demand cycles, at the macro level, this insatiable appetite for data and the processing resources that need to go to make that data relevant ...  those trends continue and we feel very good about how we're positioned to capitalize on this increased demand," CEO Robert Swan told investors on a conference call late Thursday.

"Second, as you know from a cloud perspective, which now is a bigger and bigger part of our overall DCG revenue, we expect them to continue to benefit from the trajectories that I mentioned initially," he added. "At the same time, you'll remember from last year, our ability to predict the cloud -- the CSPs purchasing and then kind of digestion patterns is relatively hard. So we look at first half to second half, Q1 will be the in essence the third quarter in a row of real strong consumption patterns from the cloud folks."

Intel shares were marked 7.75% higher in early trading Friday to change hands at $68.24 each, the highest since September 2000 and a move that would extend the stock's six-month gain to around 30%.

"We expect shares to trade somewhat higher near term on better results/guidance and an acceleration in DCG despite growing competitive concerns and expected 2H slowdown," said Oppenheimer analyst Rick Schafer. "We remain sidelined and expect accelerated node transitions (10nm/7nm) to put upward pressure on capex and downward pressure on (gross margins, free cash flow) and shareholder returns."