ISLAMABAD: Intel shares fell more than 12 percent on Friday after the company gave a pessimistic outlook, and its forecasts caused investors to worry that the boom in AI investment is siphoning off enterprise spending on its conventional data centre processors.
The stock of the chipmaker has now fallen by almost 30 percent this year, as it struggles to keep up with rivals like Nvidia in the development of the latest AI processors and technologies, according to AFP.
Intel had previously forecasted revenue of between 12.5 billion and 13.5 billion dollars in its second-quarter outlook, which was lower than the estimated 13.57 billion dollars by analysts based on LSEG data.
Bernstein analysts said the outlook was an indication of more underlying problems. Although we feel that Intel is doing everything right to turn the situation around, it is also evident that the company is in very bad shape, and it may take years before the company can recover fully.
The sudden drop in the share price on Friday is likely to rise closely to 19 billion dollars of the market value that was valued at 149.4 billion dollars at the end of the previous trading day.
Despite the huge investment it is making in the future, such as a $100 billion initiative to build and expand manufacturing plants in four U.S. states, and the introduction of its new Gaudi 3 AI chip, Intel still has to contend with intense competition.
The companies are increasingly focusing on high-performance AI server chips, which are eating into the market of Intel traditional central processing units (CPUs) that have long been the foundation of data centre infrastructure.
Goldman Sachs analysts said that although Intel has some bright spots such as Gaudi 3, the company can still lose market share in the data centre market to competitors like Nvidia and Arm.
Nevertheless, there is a bit of optimism. Intel is optimistic that a new cycle of upgrades in the personal computer market, which is expected to be triggered by the release of a new version of Microsoft Windows, could spur greater demand from its PC chips later in the year.
Intel reported a poor performance, which contrasted with strong earnings reports by Microsoft and Alphabet, two of the largest customers of Nvidia and developers of their own in-house AI chips to use in data centres.
The increasing trend towards AI-oriented computing is transforming the semiconductor industry, with established players like Intel struggling to keep up in a rapidly evolving market.
