Intel shares tumbled 7% in trade-here’s why
Summary
According to data from the London Stock Exchange Group (LSEG), Intel’s second-quarter revenue forecast of $12.5 billion to $13.5 billion falls short of analysts’ expectations, who had pegged the figure at $13.57 billion.
Chipmaker Intel witnessed a significant setback in premarket trading on Friday, with its shares plunging over 7% amidst a bleak sales forecast for the second quarter. The root cause of this downturn lies in a notable shift in enterprise spending patterns away from Intel’s traditional data centre and PC chips, towards artificial intelligence (AI).
Intel’s stock has been on a downward trajectory throughout the year, marking a 30% decline thus far. Lagging behind competitors such as Nvidia in advanced AI chip production, the company finds itself grappling with a landscape increasingly dominated by innovative AI components.
According to data from the London Stock Exchange Group (LSEG), Intel’s second-quarter revenue forecast of $12.5 billion to $13.5 billion falls short of analysts’ expectations, who had pegged the figure at $13.57 billion.
“While we believe they are doing everything they can to try to repair things, it is clear that the company is profoundly broken, and it will take years to see the fruits of their (currently exhaustive) labour,” Reuters quoted Bernstein analysts.
In a bid to regain momentum, Intel has announced a monumental $100 billion investment spree across four states in the US, aimed at bolstering and expanding its manufacturing capabilities. Additionally, the company unveiled a new AI chip earlier this year.
The shift in spending patterns among businesses, favouring swift and advanced AI server chips over Intel’s traditional central processing units (CPUs), has dealt a blow to the company’s bottom line. Historically, Intel’s CPUs have been the cornerstone of data centre operations for decades.
Despite the prevailing challenges, Intel remains optimistic about a potential resurgence in PC sales in the latter half of the year. A forthcoming upgrade cycle surrounding the release of a new iteration of Microsoft’s Windows operating system is anticipated to fuel demand for PCs, consequently boosting sales of Intel chips.
However, Intel’s struggles stand in stark contrast to the robust performance reported by tech giants Microsoft and Google, both of which are clients of AI chip leader Nvidia. Notably, these companies have also ventured into designing in-house chips for their data centres, further intensifying competition in the semiconductor market.
(With inputs from Reuters)
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