Intel (NASDAQ:INTC) experienced a significant drop of over 12% following a gloomy first-quarter revenue outlook, highlighting the chipmaker’s struggle to keep up in the AI race amid challenges in the weak PC market. While the chip sector is witnessing a surge driven by AI, Intel appears to be an exception, prompting concerns among analysts.
The chipmaker’s forecast, coupled with its position as one of the major suppliers of PC chips, cast a shadow on the entire semiconductor sector. The Philadelphia SE Semiconductor Index (.SOX) registered a 2.7% decline, marking its worst day in over three weeks. Analysts noted that AI, a key driver for chip demand, seems notably absent from Intel’s growth strategy.
Hans Mosesmann, an analyst at Rosenblatt Securities, expressed skepticism, stating, “AI seems like (it is) everywhere except at Intel.” He emphasized the lack of a discernible AI growth vector, suggesting that Intel might be facing another transitional year.
The impact extended to other chipmakers, with Nvidia (NASDAQ:NVDA), Advanced Micro Devices (NASDAQ:AMD), Qualcomm (NASDAQ:QCOM), and Micron Technology (NASDAQ:MU) witnessing declines ranging from 1.3% to 2.8%. Intel’s market value was set to drop by about $26 billion if losses were held, based on its share price of $43.47.
Intel’s current-quarter revenue forecast, potentially falling short of market estimates by over $2 billion, raised concerns about the company being left behind in the competitive AI landscape. While Intel is not yet competitive in AI-specific chips, its central processing units (CPUs) are frequently used alongside Nvidia’s AI chips. Approximately one-third of Intel’s server CPUs are sold as part of AI systems.
Despite the challenges, some analysts expressed optimism, with at least 15 brokerages raising price targets for Intel. The median price among brokerages is $44. Thomas Monteiro, senior analyst at Investing.com, acknowledged Intel’s AI bet in the long run and noted that margins appear solid, allowing CEO Pat Gelsinger’s plan to proceed, albeit at a slower pace.
Intel’s stock currently trades at around 28 times its 12-month forward earnings estimates, in comparison to 45.08 for AMD and nearly 30 for Nvidia, according to LSEG data. The market’s response reflects concerns about Intel’s ability to compete in the evolving landscape of AI-driven chip demand.
Featured Image: Unsplash
Author Faith Yakubu 
