Intel forecast misses estimates, shares tumble
Intel forecast second-quarter revenue and profit below market estimates on Thursday, sending its shares tumbling roughly 8 per cent as it faces weak demand for its traditional data centre and PC chips and trails in the surging market for AI components.
Businesses have prioritised spending on advanced and speedy artificial intelligence server chips, hurting demand for Intel's central processing units (CPUS), which have been the mainstay chip-powering data centres for decades.
Helped by its software, Nvidia dominates the market for AI chips with its powerful graphics processing units (GPUS), and commanded roughly 80 per cent share last year.
Intel's other largest market - PC chips - has suffered a difficult two years, but has shown signs of life at the beginning of 2024.
While Intel lost US$11 billion in stock market value following its results late on Thursday, Nvidia's value grew by $40 billion, lifted by strong results from Microsoft and Alphabet as the two cloud heavyweights race to expand their AI product lineups.
"Intel is still very much a 'show me' story. So I think when you get quarters where they don't execute and they promise more at a future point, that there's some scepticism around their ability to deliver," said Matthew Bryson, an analyst at Wedbush.
In addition to deploying Nvidia's AI chips, Microsoft and Alphabet's Google design in-house chips for their data centres.
Intel's Gaudi AI chips are likely to achieve more than $500 million in revenue this year, CEO Pat Gelsinger said in an interview. Intel launched its third generation Gaudi 3 processor in April in an effort to better compete with Nvidia.
"What's most exciting to me is enterprise (AI) customers," and small companies have Gelsinger said. "I sought to acquire tens of think ultimately the monetisation billions of dollars worth of of AI is when it starts them. Surging demand and transforming enterprises." Nvidia's limited supply of
Shares of the Santa Clara, these advanced chips have California-based company left Intel and AMD with opdportunities
extendend fell to $32.35 in to take market trading, their lowest since share.
August. Intel is optimistic about
Rival Advanced Micro personal computer sales in Devices forecasted it would the second half of the year sell $3.5 billion worth of AI because it anticipates a fresh chips this year when it reported PC upgrade cycle around a earnings in January. new version of Microsoft's Shares of AMD, which also Windows operating system. competes against Intel in PC The company also expects processors, added 2.6 per software vendors launching cent following Intel's report. next-generation products to
Despite a lacklustre start help lift demand for PCS to the year and its weak second-quarter and Intel's chips, Gelsinger forecast, Gelsinger said. said almost all of InBut the supply of its most tel's products would rebound advanced PC chips has been in the second half of 2024. limited by a bottleneck in its
"It's a first-half, second-half manufacturing process, executives story for the industry," said in the conference Gelsinger said. "We see call. essentially every business of Intel expects second-quarIntel (fares) better in the second ter revenue of $12.5 billion half of the year." to $13.5 billion, compared
Nvidia's GPUS dominate with analysts' average esthe AI market, as large timate of $13.57 billion,
LSEG data showed.
Intel forecast second-quarter adjusted earnings of 10 cents per share, also below expectations.
Total revenue of $12.72 billion in the first quarter marginally missed expectations of $12.78 billion. Sales at its data center business rose 5 per cent to $3 billion during the period.
Intel's contract manufacturing business, or foundry, is working to catch up with industry leader TSMC, but profits remain years away. Revenue from the foundry business fell 10 per cent in the first quarter.
During the conference call on Thursday, Intel executives said its foundry business would see quarter-over-quarter improvement until 2030. The company disclosed foundry operating losses of $2.5 billion in the first quarter as part of its plans to report foundry operations as a standalone unit.
Adjusted gross margin rose to 45.1 per cent from 38.4 per cent in the 2023 first quarter, beating analysts' consensus estimate of 44.3 per cent.