- Intel’s stock experienced a significant 11.91% drop, the largest in over three years, following disappointing first-quarter performance forecasts and concerns about its AI competitiveness.
- The company’s lower-than-expected sales and earnings per share, coupled with perceived lagging in the AI sector, triggered the sell-off.
- Intel’s CEO, Pat Gelsinger, expressed confidence, highlighting the company’s ongoing efforts in the AI accelerator market and stating Intel’s long-term position in AI remains strong.
Some point out that the stock price of the U.S. semiconductor company Intel is facing a significant shake-up due to disappointing performance forecasts and competition in artificial intelligence (AI).
Disappointing Q1 forecasts and concerns over AI competition
On the 26th (local time), on the New York Stock Exchange, Intel’s stock price plummeted by 11.91% to close at $43.65, the largest drop in about 3 years and 6 months since July 2020. It has decreased by 13.13% this year. Intel’s stock price doubled last year. However, the stock price fluctuated significantly after the announcement of the first-quarter forecast, which was much lower than the market’s expectations, and concerns were raised that Intel was lagging in AI competition among major semiconductor companies.
Intel’s first-quarter forecast announced the previous day was sales of $12.2 billion to $13.2 billion and earnings per share of $0.13, significantly lower than the market’s average forecast of $14.15 billion in sales and $0.33 in earnings per share. Intel CEO Pat Gelsinger said, ‘Core businesses such as PCs and servers, along with non-core industries, face a seasonal decrease in demand. Due to the weakness of Mobileye, an autonomous driving car subsidiary in which Intel is a major shareholder, the first-quarter sales performance will be significantly affected.’
Intel is lagging behind, prompting stock sell-offs
Some areas of the semiconductor industry are thriving due to strong demand for AI chips. However, companies like Intel, which manufactures central processing units (CPUs) and other server components, do not have clear growth opportunities in the AI craze. Aaron Rakers, an analyst at investment bank Wells Fargo, said, ‘The selling momentum after Intel announced its performance is natural. There are questions about when Intel can catch up in the AI competition where competitors are profiting from AI calculations.’
Some market experts say that Intel is lagging in the data centre AI competition and have issued sell recommendations for Intel stocks. According to Reuters, analyst Hans Mosesmann of US Rosenblatt Securities issued a sell rating for Intel stocks, saying, ‘AI seems to be everywhere except for Intel.’ The head of investment at online investment platform AJ Bell pointed out, ‘Semiconductor companies like Nvidia and AMD are playing an increasingly important role in the AI industry hungry for data, and Intel is facing the danger of falling behind.’
However, Reuters reported that Intel’s CPUs are sometimes used together with Nvidia’s AI chips, known as the ‘biggest beneficiaries of AI,’ and ‘currently one-third of Intel’s server CPUs are sold as part of AI systems.’
US semiconductor company Intel announced that it will show lower-than-market consensus performance in the first quarter of this year, and its stock price plummeted nearly 12% on the 26th (local time). This is the largest drop since about 3 years and 6 months since July 2020.
After announcing the fourth-quarter performance last year, Intel predicted on a conference call yesterday that sales for the first quarter of this year would be between $12.2 billion and $13.2 billion. The EPS forecast is $0.13. This is still less than the sales of $14.15 billion and EPS of $0.33 compiled by financial information company LSEG.
Mixed sentiments surround Intel as analysts differ on prospects
Wall Street believes that while some companies such as Nvidia are prospering due to strong demand for artificial intelligence (AI) chips in the semiconductor industry, companies like Intel, which manufactures central processing units (CPUs) for servers, do not have growth momentum.
Laszlo Mold, Head of Investment at online investment platform AJ Bell, also pointed out, ‘Chip companies like Nvidia and AMD play an important role in the AI industry, and Intel is lagging behind.’
However, at least 15 securities companies have raised their target stock prices for Intel. Their average target stock price is $44.
Thomas Montiero, chief analyst at Investing.com, commented, ‘In the long run, Intel is still in a winning position in the AI betting.’
Deutsche Bank analyst Simon Ross commented, ‘This big ‘mistake’ (numbers lower than market expectations) is obviously negative, but most of the reasons for the progressive weakness are out of Intel’s ‘core’ PC and DC CPU areas, which is somewhat encouraging.’
Intel CEO Pat Gelsinger also showed confidence. He said on a US TV program on the same day, ‘Intel is slowly advancing in the AI accelerator market, Nvidia style.’ Gelsinger emphasized, ‘We have the ability to participate 100% in the AI market
