Intel tumbles on dismal forecast, weak PC chip demand

(Reuters) – Intel slumped nearly 12% on Friday reeling from a bleak first-quarter revenue outlook as the chipmaker struggles to navigate uncertain demand in traditional computing markets and attempts to play catch up in the AI race.

The chipmaker was set to lose about $25 billion in market value, if premarket losses hold, based on its share price of $43.65. Its stock had soared 90% in 2023.

Analysts say that while plenty of businesses in the chip sector have been bullish lately, Intel becomes the exception on concerns that the company is late to the competition in data center AI.

Sales have been slowing in the PC and laptop processing chip market, which is Intel’s bread and butter, said Russ Mould, investment director at AJ Bell.

“There is a danger Intel is being left behind as chips from the likes of Nvidia and Advanced Micro Devices play an increasingly important role in the data-hungry AI industry,” Mould added.

The forecast was worse than feared, that current-quarter revenue could miss market estimates by more than $2 billion. Adjusted profit forecast of 13 cents a share also fell short of expectations.

Intel is not yet competitive in the market for AI-specific chips, but the company’s central processing units (CPUs) are often used in conjunction with Nvidia’s AI chips, with a third of Intel’s server CPUs now sold as part of AI systems.

“Although Intel beat (Q4 revenue) estimates, investors’ disappointment in Intel’s Data Center GPU story’s growth can be primarily attributed to the slower-than-expected product delivery and ramp-up,” said Lucas Keh, semiconductors analyst at Third Bridge.

The gloomy forecast from one of the largest suppliers of PC chips by market share dampened hopes of the PC market recovering, sending shares of other chipmakers lower premarket.

Nvidia, Advanced Micro Devices, Qualcomm and Micron Technology were down between 1% and 2.5%.

The company’s stock trades at about 28 times its 12-month forward earnings estimates, compared with 45.08 for AMD and nearly 30 for Nvidia, Intel’s peers in the sector, according to LSEG data.

(Reporting by Samrhitha Arunasalam in Bengaluru; Editing by Shailesh Kuber)