Intel Corp (INTC.O) saw about $8 billion erased from its market value on Friday after the U.S. chipmaker stumped Wall Street with bleak earnings projections, fueling fears around a slowdown in the personal computer market.
The company projected a surprise loss for the first quarter and its revenue forecast was $3 billion lower than estimates as it also grappled with weakening growth in the data center business.
Intel shares closed 6.4 percent lower, while rival Nvidia (NVDA.O) and Advanced Micro Devices (AMD.O) ended the session up 2.8% and 0.3% and 2.8%, respectively. Intel supplier KLA Corp (KLAC.O) settled 6.9% lower after its bleak forecast.
“No words can portray or explain the historic collapse of Intel,” said Rosenblatt Securities’ Hans Mosesmann, who was one of the 21 analysts to lower their price targets on the stock.
The poor outlook highlighted the challenges facing Chief Executive Pat Gelsinger as he attempts to restore Intel’s dominance of the sector by increasing contract manufacturing and building new factories in Europe and the United States.
Notably, the company has been gradually losing market share to competitors like AMD, which has used contract chipmakers such as Taiwan-based TSMC (2330.TW) to design chips that outrank Intel’s technology.
“AMD’s Genoa and Bergamo (data center) chips have a strong price-performance advantage compared to Intel’s Sapphire Rapids processors, which should drive further AMD share gains,” said Matt Wegner, analyst at YipitData.
Analysts said that places Intel at a disadvantage even when the data center market collapses, expected in the second half of last year, as the company would have lost even more share by then.
“It is now clear why Intel needs to cut so much cost as the company’s original plans prove to be fantasy,” brokerage Bernstein said.
“The magnitude of the deterioration is stunning, and brings potential concern to the company’s cash position over time.”
Intel, which plans to slash $3 billion in costs in 2023, earned $7.7 billion in cash from operations in the December quarter and paid dividends of $1.5 billion.
With capital expenditure estimated to be nearly $20 billion this year, analysts said the company should consider reducing its dividend.