In a setback for Intel, shares of the chip giant plummeted over 7% premarket on Friday following a subdued second-quarter sales forecast indicating a shift in enterprise spending away from traditional data center and PC chips towards booming AI technology.
The dip in Intel’s stock which has already fallen approximately 30% this year reflects challenges in keeping pace with competitors like Nvidia in the realm of advanced AI chips and components.
For the second quarter, Intel projected revenue in the range of $12.5 billion to $13.5 billion falling short of analysts expectations averaging $13.57 billion.
Analysts at Bernstein expressed skepticism about Intel’s prospects suggesting that despite efforts to address issues, the company’s fundamental challenges would take time to resolve.
In response to market pressures, Intel has announced plans for a substantial $100 billion investment across four U.S. states to bolster its manufacturing capabilities. Additionally, it introduced a new AI chip earlier this year to remain competitive.
The shift in spending towards AI server chips has adversely impacted demand for Intel’s CPUs which have historically dominated data center chip usage.
Despite these challenges, Intel remains optimistic about a potential upturn in PC sales driven by a new version of Microsoft’s Windows operating system in the latter half of the year potentially spurring demand for Intel chips in PCs.
However, Intel’s struggles stand in contrast to strong performances from tech giants Microsoft and Alphabet-owned Google which leverage AI chip leader Nvidia’s products and develop in-house chips for their data centers.
