Intel INTC-Q slumped nearly 11 per cent on Friday following a bleak first-quarter revenue outlook, as the chipmaker plays catch-up in the AI race, while also dealing with weak demand in the PC market.
Intel was set to lose over $22-billion in market value, if losses hold, based on its share price of $44.26 in morning trade. Its stock soared 90 per cent in 2023.
The forecast from one of the largest suppliers of PC chips weighed on Nvidia NVDA-Q, Advanced Micro Devices AMD-Q, Qualcomm QCOM-Q and Micron Technology MU-Q, which fell between 0.9 per cent and 2.4 per cent.
Analysts say that while plenty of businesses in the chip sector have been bullish lately, Intel becomes the exception on concerns that it is late to the competition in data center AI.
“AI seems like everywhere except at Intel,” said Hans Mosesmann, analyst at Rosenblatt Securities, which has a sell rating on the stock.
The lack of any perceivable AI growth vector that moves any dial, “points to another, yes another, transitional year.”
The chipmaker forecast current-quarter revenue that could fall short of market estimates by more than $2-billion.
“There’s 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,” said Russ Mould, investment director at AJ Bell.
While Intel isn’t yet competitive in the AI-specific chip market, its 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.
Some analysts remained positive on the stock with at least 15 brokerages raising price targets with the median price at $44, per LSEG data.
“The company still stands to win from its AI bet in the long run. Margins appear solid, meaning that CEO Pat Gelsinger’s plan will still be put in motion, albeit at a slower pace,” said Thomas Monteiro, senior analyst at Investing.com.
Intel’s stock trades at about 28 times its 12-month forward earnings estimates, versus 45.08 for AMD and nearly 30 for Nvidia, according to LSEG data.