Intel saw nearly $8 billion wiped off its market value on Friday as the U.S. chipmaker stumped Wall Street with disappointing earnings estimates, fueling fears of a slowdown in the personal computer market. .
The company had forecast a surprise loss for the first quarter and its revenue was $3 billion short of forecast estimates as it also struggled with slower growth in its data center business.
Intel shares closed down 6.4%, while rivals Advanced Micro Devices and Nvidia ended the session up 0.3% and 2.8%, respectively. Intel supplier KLA was down 6.9 percent after its disappointing forecast.
“No words can describe or describe Intel’s historic collapse,” said Rosenblatt Securities’ Hans Moseman, who was among 21 analysts who cut price targets on the stock.
The poor outlook underscored the challenges facing Chief Executive Pete Gelsinger as he tries to re-establish Intel’s dominance of the sector by expanding contract manufacturing and building new factories in the United States and Europe.
The company has been steadily losing market share to rivals such as AMD, which has used contract chipmakers such as Taiwan-based TSMC to produce chips that outperform Intel’s technology.
“AMD’s Genoa and Bergamo (data center) chips have a strong price-performance advantage over Intel’s Sapphire Rapids processors, which should further boost AMD shares,” said YipitData analyst Matt Wagner. “
Analysts say that puts Intel at a disadvantage even when the data center market is expected to grow in the second half of 2022, as the company would have lost even more share by then.
“It’s now clear why Intel needs to cut so much cost as the company’s original plans turn out to be fantasy,” brokerage Bernstein said.
“The magnitude of the impairment is staggering, and raises potential concerns over the company’s cash position over time.”
Intel, which plans to cut $3 billion in costs this year, generated $7.7 billion in cash from operations in the fourth quarter and paid a $1.5 billion dividend.
With capital expenditures of about $20 billion in 2023, analysts said the company should consider cutting its profits.