On January 26, Intel (INTC.O) witnessed a substantial 12% decline in its stock value after issuing a pessimistic first-quarter revenue projection. The chipmaker, grappling with a sluggish PC market and striving to catch up in the AI race, stood out unfavorably in contrast to the flourishing chip sector propelled by AI demand in 2023.
While many semiconductor manufacturers experienced stock market success due to the surge in demand for chips supporting generative AI, Intel’s forecast cast a shadow over the entire sector. The Philadelphia SE Semiconductor Index (.SOX) registered a 2.7% decline, marking its most significant single-day drop in over three weeks.
Analysts pointed out Intel’s apparent lack of growth in the AI domain, contrasting it with the widespread presence of AI in other companies. Hans Mosesmann, an analyst at Rosenblatt Securities, commented on the absence of a noticeable AI growth trajectory at Intel, characterizing the situation as another transitional year for the company.
The repercussions were felt by other chipmakers as well, with Nvidia (NVDA.O), Advanced Micro Devices (AMD.O), Qualcomm (QCOM.O), and Micron Technology (MU.O) witnessing declines ranging from 1.3% to 2.8%. Intel’s market value plummeted by about $24.9 billion, erasing some of the gains it had made with a 90% surge in 2023.
Intel’s forecast for the current quarter hinted at potential revenue shortfall exceeding $2 billion compared to market estimates, raising concerns that the company might be falling behind competitors like Nvidia and Advanced Micro Devices in the data-intensive AI industry.
Despite Intel’s struggles in the AI-specific chip market, its central processing units (CPUs) are frequently used alongside Nvidia’s AI chips, with a significant portion of Intel’s server CPUs now integrated into AI systems. Some analysts expressed optimism, with at least 15 brokerages raising price targets. The median price, based on LSEG data, stands at $44.
Russ Mould, investment director at AJ Bell, highlighted the risk of Intel being left behind in the AI landscape while acknowledging its role in AI systems through collaboration with companies like Nvidia. On a positive note, Thomas Monteiro, a senior analyst at Investing.com, emphasized that Intel still stands to benefit from its AI investments in the long run, citing solid margins and CEO Pat Gelsinger’s strategic plan, albeit at a slower pace. Intel’s stock currently trades at approximately 28 times its 12-month forward earnings estimates, in contrast to AMD’s 45.08 and Nvidia’s nearly 30, according to LSEG data.