Technology giant Intel may encounter some difficulties in the short term due to declining sales of personal computers, but according to analyst Srini Pajjuri from Raymond James, investors should focus on the chip maker's long-term prospects.

Pajjuri has reiterated an "Outperform" rating for Intel shares and has increased his target stock price to $48 from $42. Despite this positive outlook, Intel stock was down 0.9% to $44.15 in early trading on Tuesday, while the S&P 500 saw a 0.1% increase.

Recent financial results from Dell Technologies have been disappointing, with the company stating that there has been a weakening demand for PCs over the past two months. While Dell has noted strong demand for AI servers, a full recovery in sales for traditional computers is expected to take longer.

Pajjuri acknowledged this near-term softness in PC sales but expressed confidence in Intel's ability to turn things around. The company's focus on the emerging opportunities in AI and its progress in the leading edge Foundry business are reasons for optimism.

Intel has made Foundry Services a priority, with CEO Pat Gelsinger aiming to revitalize the chip maker. By providing domestic alternatives to chip design companies that don't have in-house manufacturing capabilities, Intel hopes to compete with Taiwan Semiconductor Manufacturing.

Pajjuri believes that Intel will successfully achieve its objectives to enhance its chip manufacturing capabilities, making it more attractive to new customers.

Additionally, the analyst mentioned Intel's $2 billion pipeline of orders for Gaudi AI accelerators, which are the company's AI-focused chip products. He expressed confidence in Intel's ability to sell these chips to enterprises for various AI models specific to different industries.

Furthermore, Pajjuri highlighted the potential of AI PCs and their ability to offer solid incremental opportunities. Applications like Microsoft Copilot are gaining broader adoption, which could further contribute to Intel's growth.

In conclusion, while Intel may face challenges in the near term due to declining PC sales, the company's long-term prospects remain promising. As Intel continues to focus on emerging opportunities in AI and improves its chip manufacturing capabilities, there are reasons for investors to be optimistic about its future success.

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