Intel shares fell more than 12% on Friday after bearish forecasts signaled that the artificial intelligence boom is shifting corporate spending away from conventional chips and toward data centers.
The company’s shares have fallen about 30% this year as Intel matches rival chipmakers such as Nvidia in producing advanced artificial intelligence (AI) chips and components.
Intel forecast second-quarter revenue of $12.5 billion to $13.5 billion, compared with analysts’ average estimates of $13.57 billion, according to LSEG data.
“While we believe they are doing everything they can to turn things around, it is clear that the company is deeply broken and it will be many years before they see the fruits of their (now exhausting) work,” Bernstein analysts said in a note.
Intel plans to spend $100 billion in four US states on the construction and expansion of factories. Earlier this year, the company also unveiled a modern AI chip to keep up with the competition.
Friday’s decline was expected to wipe out nearly $19 billion from the company’s market value, which stood at $149.4 billion at Thursday’s close.
Companies have prioritized spending on advanced and rapid AI server chips, hurting demand for Intel CPUs, which have long been the main chips powering data centers.
While the launch of Intel’s Gaudi 3 AI chip has encouraged us, “we are concerned that the company will continue to cede wallet share in the overall data center computing market to companies such as Nvidia and Arm,” analysts said Goldman Sachs.
Still, Intel is hopeful that a modern PC upgrade cycle based on the modern version of Microsoft’s Windows operating system will assist PC sales in the second half of the year. This may translate into greater demand for the chips used in these devices.
The company’s profits contrasted with mighty results from Microsoft and Alphabet, which are Nvidia customers and which also design their own chips for their data centers.
