Intel plunges 25% amid surging memory costs and PC weakness
"The industry continues to navigate one of the most significant supply shortages in history," Intel CEO Lip-Bu Tan said on an earnings call.
Intel's stock plummeted by as much as 25% in premarket trading on Friday, following disappointing earnings and warnings of a severe supply shortage in the technology industry. Intel CEO Lip-Bu Tan stated that this is one of the most significant supply shortages in history, driven by soaring demand for memory and server chips due to the AI boom. The chipmaker's PC business is facing headwinds, with revenue expected to decline by more than 20% in the fourth quarter.
Intel reported third-quarter revenue of $16.5 billion, a 20% increase from the previous year, but forecast fourth-quarter revenue between $15 billion and $16 billion, down from $0.52 to $0.25 in the third quarter. The AI boom is causing memory prices to rise, making PCs more expensive to build and purchase, leading computer manufacturers to order fewer Intel chips.
The client-computing group, responsible for chips sold to consumers, generated $8.1 billion in the third quarter, a 9% decrease from the prior quarter. Intel anticipates a decline in revenue by more than 20% in the fourth quarter. The company predicts global PC sales will fall by approximately 12% this year and another 10% in 2027.
Intel's data-center business showed some resilience, with revenue up nearly 80% year-over-year to $7.3 billion. However, the company could not meet all the demand for its server chips due to a two-week shutdown at its Israeli plant following an unfortunate accident. This shutdown is expected to cut fourth-quarter revenue by around $300 million.
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