Intel Shares Drop 13% as AI Data Center Chip Demand Surges
The company said it struggled to satisfy demand for server chips used in AI data centers. As a result, it forecast quarterly revenue and profit below market estimates. Shares then dropped 13% in after-hours trading.
AI data center demand outpaces supply
The outlook highlights how difficult it is to predict global chip markets. Meanwhile, the company’s current lineup reflects decisions made years ago. Even though its stock has gained 40% in the past month, pressure remains high.
Recently, it launched a long-awaited laptop chip to regain momentum in personal computers. However, a memory chip crunch is expected to reduce sales across the PC industry.
At the same time, demand surged for server processors that support AI chips. Although factories are running at full capacity, the company still cannot meet orders. Therefore, it is missing out on profitable data center sales. Additionally, the new PC chip is putting pressure on margins.
Weak forecast sparks investor concerns
The company forecast current-quarter revenue between $11.7 billion and $12.7 billion. In comparison, analysts expected $12.51 billion, according to data compiled by LSEG.
It also expects adjusted earnings per share to break even in the first quarter. However, analysts had expected adjusted earnings of 5 cents per share.
Investors had hoped rapid data center buildouts would increase sales of traditional server chips. These chips are commonly used alongside Nvidia’s leading graphics processing units.
Meanwhile, some large cloud companies were surprised by the pace of AI-driven demand. As a result, they rushed to upgrade older systems after network performance weakened. Still, production shifts take time, even with in-house manufacturing.
Turnaround focus and 14A customer discussions continue
After setbacks in the AI chip market, the company has pushed a turnaround plan. The strategy focuses on cutting costs and reducing management layers. At the same time, it supports a fresh product road map.
The company has delayed heavy investment in its next-generation manufacturing process known as 14A. Instead, it is waiting for major customer commitments before increasing spending. However, outside interest continues to build.
Two customers are evaluating the technical details of the 14A technology. This could lead to test chip development if progress continues. The company expects to know by the second half of the year whether external customers want to use the process.
