Intel’s Historic Collapse Erases $8 Billion From Market Value

Intel Corp. lost $8 billion Markt Friday’s value surged after Wall Street was unable to believe the U.S. chipmaker’s earnings projections. This raised fears about a possible slump in the personal computer market.

The company had predicted a surprise loss for its first quarter, and its revenue forecast was $3B less than the estimates.

Intel shares closed lower by 6.4%, while Nvidia and Advanced Micro Devices ended the session higher by 0.3 percent and 2.8%, respectively. After its poor forecast, Intel supplier KLA Corp. closed 6.9 percent lower.

“No words can portray or explain the historic collapse of Intel,” said Rosenblatt Securities’ Hans Mosesmann, who was among the 21 analysts to cut their price targets on the stock.

The poor outlook underscored the challenges facing Chief Executive Pat Gelsinger as he tries to reestablish 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 like AMD, which has used contract chipmakers such as Taiwan-based TSMC to make chips that outpace Intel’s technology.

“AMD’s Genoa and Bergamo (data center) chips have a strong price-performance advantage compared to Intel’s Sapphire Rapids processors, which should drive further AMD share gains,” said Matt Wegner, analyst at YipitData.

Analysts stated that Intel would lose even more market share if the data center market bottoms, which is expected to happen in the second half 2022.

“It is now clear why Intel needs to cut so much cost as the company’s original plans prove to be fantasy,” brokerage Bernstein said.

“The magnitude of the deterioration is stunning, and brings potential concern to the company’s cash position over time.”

Intel, which intends to cut costs by $3B this year, generated $7.7B in cash from operations in its fourth quarter. It also paid dividends of $1.5B.

Analysts suggested that the company cut its dividend because of the estimated $20 billion capital expenditure in 2023.