The company’s current-quarter revenue forecast is expected to fall short of market estimates by over $2 billion.
On Friday, Intel experienced a major sink, with its shares dropping over 12% due to a grim revenue outlook for the first quarter. This decline is attributed to the company’s struggle to keep pace in the AI sector and a weakening PC market.
Despite the boost in the chip sector driven by AI, Intel appears to be lagging, as noted by analysts. The company’s current-quarter revenue forecast is expected to fall short of market estimates by over $2 billion. Semiconductor makers specialising in chips for generative AI, which require heavy data processing, have been some of the biggest stock market winners in 2023.
Intel’s forecast, as a major supplier of PC chips, has had a negative impact on the broader sector. The Philadelphia SE Semiconductor Index also fell by 2.7%, marking its worst day in over three weeks. Hans Mosesmann, an analyst at Rosenblatt Securities, which holds a sell rating on Intel, commented on the apparent absence of AI initiatives at Intel, indicating another year of transition for the company.
Other chip makers like Nvidia, Advanced Micro Devices, Qualcomm, and Micron Technology also saw their shares decline, ranging between 1.3% and 2.8%. Intel’s market value dropped by about $24.9 billion based on its closing price of $43.65 on Friday, despite its shares having soared by 90% in 2023.
While Intel’s CPUs are often used alongside Nvidia’s AI chips, with a third of Intel’s server CPUs sold as part of AI systems, the company is not yet competitive in the AI-specific chip market. Despite the challenges, some analysts remain positive, with at least 15 brokerages raising their price targets on Intel’s stock, with a median brokerage price of $44, according to LSEG data.
Thomas Monteiro, senior analyst at Investing.com, believes that Intel still has potential to benefit from its AI investments in the long run, with solid margins indicating that CEO Pat Gelsinger’s plan will continue, albeit more slowly. In terms of stock valuation, Intel trades at around 28 times its 12-month forward earnings estimates, compared to AMD’s 45.08 and Nvidia’s nearly 30, based on LSEG data.
