Intel shares drop 14% on Israel factory blast, PC weakness

Intel shares experienced a significant 14% drop on Thursday following a devastating explosion at its Israel manufacturing facility, which is projected to result in a loss of approximately $600 million in revenue over two quarters. The company also warned that PC sales are expected to decline through the first half of the upcoming year due to rising memory prices.

The blast, which left two people dead and one seriously injured, has caused Intel to reassess the usability of wafers produced at the plant. The fourth-quarter revenue outlook has been reduced by roughly $300 million, and gross margins are expected to decline by 200 basis points. Intel is currently determining which wafers can be salvaged and sold following the incident.

The Kiryat Gat factory, a major production site for data center chips, has been significantly impacted by the explosion. Local portfolio manager Hendi Susanto expressed concern about Intel's ability to quickly rebuild capacity to capture the lost production. Other chip sector stocks, including Nvidia, Broadcom, AMD, Micron, Qualcomm, and Arm Holdings, also experienced declines, ranging from 1% to 6% in extended trading.

Finance chief David Zinsner stated that Intel plans to resume production at the Israel factory by the end of the week, following a two-week shutdown. Intel expects a similar revenue impact in the first quarter of the new year. The company is still assessing the extent of the wafer damage and will determine which wafers are usable and unsellable.

Intel's revenue outlook for the fourth quarter has been revised downwards by $300 million, and gross margins are anticipated to decline by 200 basis points. The company expects PC revenue to decline in the mid-twenty percentage range for the fourth quarter. Intel raised $23 billion in August through a share offering to challenge industry leaders like TSMC in contract chip manufacturing, aiming to expand its manufacturing capacity.