Intel has received a downgrade from Jefferies. The firm’s analysts are worried that the chip maker is losing its edge in the data center market, as they feel the company’s M&A developments hint so.

Intel
Intel by Roebot, Flickr

Is Intel losing its edge in the data center market?

In a surprising development, the chip maker is acquiring Israeli tech company Mobileye, which makes camera sensors and software for driverless cars. The chip maker is set to shell out more than $15 billion to challenge Tesla and NVIDIA in autonomous vehicle tech. Though NVIDIA is mostly into graphic chips for gaming, it just recently began to aggressively tap the uncharted territory of driverless cars.

In a note titled “Chasing New Markets,” Jefferies analyst Mark Lipacis, said, “INTC’s use of cash for M&A makes us wonder if the market is drifting away from x86.”

Intel and its rivals have been primarily manufacturing X86s (variety of CPUs).

Further, the analyst feels that growth in Intel’s Data Center Group is slowing, as its revenue surged a meager 8% in the fourth quarter of 2016, a decline from 11% year over year.

“The bar is low, but we think its P/E multiple drifts down,” Lipacis said.

Hans Mosesmann, a chip analyst at Rosenblatt Securities, stated that he would pick NVIDIA over Intel, as the former’s superior technology makes it a better bet compared to Intel and Mobileye.

Intel does not want to be late this time

Intel is not entirely alien to the automotive industry. It does offer software and hardware products dubbed “in-vehicle solutions,” which are used in vehicle infotainment systems such as navigation and telematics systems, notes Fortune.

It’s not just Intel that’s interested in driverless tech, but companies like Qualcomm and Xilinx are also fascinated by it. Qualcomm entered into the approximately $40 billion deal to buy NXP Semiconductor last year.

Intel is, however, looking to march ahead of its rivals. Susquehanna Financial Group analyst Christopher Rolland feels that CEO Brian Krzanich is being careful as he does not want to repeat the mistake made by Paul Otellini in regard to mobile chips. Everyone knows that the chip giant was a late participant in the mobile revolution.

Meanwhile, the chip maker is also launching its 5G platform and modem to assist automakers in developing and testing a wide range of applications; the 5G wireless system is expected to be rolled out in 2020.

On Monday, INTC shares closed down 2.09% at $35.16, while Mobileye shares were up 28.24% at $60.62%.