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

The chip maker was set to lose about US$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 centre 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 $0.13/share also fell short of expectations.

Intel is not yet competitive in the market for AI-specific chips, but the company’s 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.

Disappointment

“Although Intel beat [fourth-quarter revenue] estimates, investors’ disappointment in Intel’s data centre 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 chip makers lower premarket.

Read: And now for the AI PC

Nvidia, AMD, Qualcomm and Micron Technology were down between 1% and 2.5%.

The company’s stock trades at about 28x its 12-month forward earnings estimates, compared with 45x for AMD and nearly 30x for Nvidia, Intel’s peers in the sector, according to LSEG data. — Samrhitha Arunasalam, (c) 2024 Reuters