Intel shares slid 17% Friday, a day after the chipmaker told investors it hadn’t allocated enough production capacity to meet booming demand from data centers.
“Revenue would have been meaningfully higher if we had more supply,” Chief Financial Officer David Zinsner told Wall Street analysts on a conference call Thursday.
First-quarter sales will be down about 4% from last year, the company said, even though there is strong demand from data centers for Intel microprocessors to help manage artificial intelligence tasks. Intel admitted it didn’t see the demand coming and is scrambling to catch up.
It’s an embarrassing lapse for Intel and new CEO Lip-Bu Tan, who is trying to convince investors that he will manage the chipmaker more efficiently and effectively than his predecessors. Rivals are already eating into Intel’s market share in PCs and data centers and Intel’s lack of production capacity opens the door for competitors to take more business.
Analysts were appalled by Intel’s gaffe and said it casts doubt on Tan’s turnaround plans, which depend on convincing other chip companies to use new generations of Intel’s manufacturing technology.
“In our view the stock is well ahead of Intel’s capability to deliver a competitive/profitable business model,” Bank of America’s Vivek Arya wrote in a note to clients Friday. He reiterated his “underperform” rating on Intel shares.
Intel shares fell $9.25 on Friday, to $45.07.
Bernstein Research analyst Stacy Rasgon said “the company appears to have woefully misjudged” data center demand, with its production capacity “caught massively off guard.” He has a $36 price target on Intel shares.
The artificial intelligence market is dominated by Nvidia, whose graphics processing units (GPUs) provide the advanced computing power AI systems need. But AI’s growth is also boosting demand for Intel’s more conventional chips, called central processing units (CPUs), which help manage data centers and perform specific tasks for AI systems.
That’s the silver lining in Thursday’s disappointing financial results. If Intel can do a better job matching production capacity to demand, it may yet capitalize on the AI boom — albeit to a much smaller degree than many other chip companies.
Even with Friday’s plunge, Intel’s stock price has more than doubled since August. That’s when Tan negotiated an $8.9 billion investment from the federal government. That was followed by billions more invested by SoftBank and Nvidia.
On Thursday, Intel told investors it expects other tech companies will make decisions late this year or early in 2027 about whether to use Intel’s factories to make their own chips. A consensus is emerging among analysts that Apple, and perhaps other companies, are near manufacturing deals with Intel.
That could provide an enormous boost to Intel and its comeback effort, though revenue from such deals is probably at least two years away.
“Real benefits will take into 2028,” Bank of America’s Arya said, “but headline benefits from these customers could support the stock.”