Intel shares drop 18% on Israel factory blast, PC weakness

On October 29, Intel's shares plummeted by 21% following a deadly explosion at its Israel factory, which is expected to result in a revenue loss of approximately $600 million over two quarters. The company's faltering PC market further dampened its prospects, as it may affect sales through the first half of 2027. The stock's decline comes as memory prices have surged, negatively impacting sales.

Intel CEO Lip-Bu Tan expressed disappointment in not meeting strong customer demand during the quarter, citing manufacturing supply shortages, a memory crunch, and a softening PC market as the near-term challenges the company faces. Intel's CFO, David Zinsner, indicated that the company aims to resume production at the Kiryat Gat factory by November 1, following a two-week shutdown.

Zinsner estimated a $300 million reduction in fourth-quarter revenue and a 200 basis point decrease in gross margin outlook for the same period.

The blast at the Kiryat Gat factory, which primarily produces data center chips using Intel's 10 nanometer manufacturing process, killed two individuals and left one seriously injured. Intel is currently assessing which wafers can be salvaged and sold after the incident, as it remains unclear whether the impact will extend beyond this. Industry analyst Hendi Susanto noted that the explosion has significantly reduced Intel's capacity, raising questions about whether the company can recover it quickly enough.

Intel's stock had previously more than doubled in 2026, but after the after-hours drop on October 29, investors now face a challenging decision. They must weigh ongoing manufacturing constraints, soft PC demand, strong demand for AI server chips, and the company's efforts to revive growth through a costly foundry expansion. Zinsner expects PC revenue to decline by around 20% in the company's fourth quarter, with Intel's PC chip business sales falling 5% to $8.10 billion, missing estimates of $8.98 billion.

The PC slowdown has prompted concerns among investors, who are watching for signs of demand stabilization despite Intel's expectations for a soft personal-computing market in the second half of 2026 and into 2027. Intel's strong performance in contract chip manufacturing, as it competes with industry leaders such as TSMC, has been a key focus in the company's turnaround strategy.

However, Intel's 2026 earnings are expected to show no positive cash flow as the company invests in expanding manufacturing capacity, with revenue and profit forecasts falling short of analysts' average estimates.