Chipmaker Intel falls as AI competition hurts forecasts

Chipmaker Intel falls as AI competition hurts forecasts

Intel shares fell more than 12% on Friday after gloomy forecasts signaled that the boom in AI had shifted enterprise spending away from its traditional data center chips.

Shares have fallen about 30% so far this year as Intel trails rival chip companies 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 the average analyst estimate of $13.57 billion, according to LSEG data.

“While we believe they are doing everything they can to try to fix things, it is clear that the company is badly damaged, and it will take years to see the results of their (currently complete) work,” Bernstein analysts said in a note.

Intel plans to spend $100 billion across four US states to build and expand factories. It also launched a new AI chip earlier this year to keep up with the competition.

Friday’s decline is set to wipe nearly $19 billion from the company’s market value, which stood at $149.4 billion at Thursday’s close.

Businesses have prioritized spending on cutting-edge, fast AI server chips, hurting demand for Intel’s central processing units, which have long been the main chips powering data centers.

Although encouraged by the launch of Intel’s Gaudi 3 AI chip, “we fear that companies will continue to cede share of wallet in the overall data center computing market to the likes of Nvidia and Arm”, Goldman Sachs analysts said.

Still, Intel is optimistic that a new upgrade cycle for personal computers around a new version of Microsoft’s Windows operating system will help PC sales in the second half of the year. That could translate into more demand for its chips used in those devices.

The company’s earnings contrasted with strong results from Microsoft and Alphabet, which are Nvidia customers and also design internal chips for their data centers.