Intel tumbled 29 percent, on course for worst day ever, triggers global chip rout

Intel tumbled 29 percent on Friday and was on track for its sharpest one-day decline, deepening a broader retreat in technology stocks as investors grew increasingly wary of weakening PC demand and the vast spending required to build out AI infrastructure.

The steep fall put the US chipmaker on track to shed more than US$137 billion in market value, underscoring the challenges facing CEO Lip-Bu Tan's turnaround as a prolonged PC slump offsets heavy investments in AI and manufacturing expansion.

Semiconductor stocks, including Advanced Micro Devices Arm Holdings Qualcomm Nvidia Broadcom and Micron fell between 2 percent and 10 percent.

"The market is in a sell first, ask questions later mood right now, and Intel's warning has given investors an easy excuse to take some money off the table across chip stocks," said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

The selloff spread to server makers, reflecting investor caution toward companies tied to the semiconductor and AI infrastructure supply chain.

Shares of server makers Dell Technologies Hewlett Packard Enterprise and Super Micro Computer fell between 6 percent and 10 percent.

The STOXX Europe 600 Technology Index fell 2 percent, with sector heavyweight ASML ASML.AS shedding 4.6 percent. US-listed shares of TSMC 2330.TW, the world's largest contract chipmaker, fell 3.3 percent.

Intel forecast fourth-quarter revenue of US$15 billion to US$16 billion, below analysts' average estimate of US$17.07 billion, according to data compiled by LSEG. 

Finance chief David Zinsner also said Intel does not expect positive cash flow this year.

MEMORY CRUNCH BITES

Higher memory prices, driven by suppliers shifting capacity toward AI-focused high-bandwidth memory chips, are raising PC costs and weighing on already weak consumer demand.

PC chips accounted for roughly half of Intel's third-quarter revenue, and the company expects sales from the segment to decline more than 20 percent sequentially this quarter after a 5 percent drop in the September period.

"It will be important to see if Intel can expand the highly profitable Xeon product supply to help offset this developing weakness in PC," said Brian Mulberry, chief market strategist at Zacks Investment Management.

"Bottom line, weaker sales volumes, higher manufacturing costs, and an out-of-cycle product mix is a recipe for the stock to decline over the near term as future earnings are under a lot of pressure."

Reuters

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