Intel shares plunge 28% as AI boom shortages hike chip costs
Intel shares crashed 28 percent on Friday morning after warning of a weaker market.
The short version
- The chipmaker reported third-quarter revenue of $16.5 billion.
- Supply shortages are making personal computers more expensive to build and buy.
- Computer-makers are ordering fewer chips as memory prices surge.
Why it matters to you. For your business, expensive components mean the laptops and office workstations you rely on are not getting any cheaper this season.
Check your portfolio today. Intel, the giant California semiconductor maker, just saw its shares plummet 28 percent on Friday after management warned about a weaker market. Shares were trading at $65.79 soon after the opening bell, sliding down from $92.07 at Thursday's close, according to Business Insider.
Just a day earlier, the company reported third-quarter revenue of $16.5 billion, up 20 percent from a year earlier. But the good news stopped there. Management forecast fourth-quarter revenue of $15 billion to $16 billion and earnings per share of $0.25, down sharply from $0.52 in the third quarter.
The global artificial intelligence boom is driving up demand for memory and server chips needed to train machine learning models. That massive demand created severe shortages that have pushed up memory prices worldwide. Making personal computers has suddenly become more expensive, prompting computer-makers to order fewer chips from Intel.
"The industry continues to navigate one of the most significant supply shortages in history, driven by the unprecedented demand for super intelligence," said Lip-Bu Tan, the chief executive officer of Intel. The company's client-computing group, which sells processors for standard desktop and laptop computers, generated $8.1 billion in the third quarter, dropping 9 percent from the previous period.
Management now expects that division's revenue to plunge by more than 20 percent in the final quarter of the year. The heavy losses come amid a wider sell-off in the technology sector that also hit Google, which owns search and Android, after it shed $500 billion in value following disappointing search tool revenue.
Intel expects global computer sales to decline about 12 percent this year and another 10 percent in 2027. "We do not expect a sustained recovery until memory availability improves and pricing begins to normalize," said Dave Zinsner, the chief financial officer of Intel.
The company's data-center business offered a bright spot, with server chip revenue jumping nearly 80 percent year over year to $7.3 billion. Even there, management admitted they could not meet all incoming orders. Adding to the strain, a two-week shutdown at an Israeli manufacturing plant following an accident is expected to slice another $300 million from fourth-quarter revenue.
