Stock Drops After Company Misses AI-Driven Demand
Intel shares fell sharply on Friday, sliding nearly 14%. The selloff came after the company failed to meet strong demand for data-center processors driven by artificial intelligence. Supply constraints limited Intel’s ability to deliver chips on time, disappointing investors who expected a stronger recovery.
Intel Benefits From AI Demand but Struggles to Execute
Intel missed much of the AI boom that helped Nvidia become the world’s most valuable chipmaker. However, demand for Intel’s traditional server processors has increased in recent months. Data centers use these chips alongside advanced graphics processors.
Investments from the U.S. government, SoftBank, and Nvidia also boosted investor confidence. These developments helped revive interest in Intel’s turnaround story.
Strong Share Rally Raises Investor Expectations
Intel shares outperformed most semiconductor stocks last year, gaining 84%. The rally extended into 2026, with the stock rising 47% so far in January.
Analysts, however, warned that optimism drove much of the rally. Near-term business fundamentals did not fully support the surge.
“The rally relied more on expectations than on current performance,” TD Cowen analysts said.
Supply Constraints Limit Chip Output
Intel continues to run its factories at full capacity. Even so, the company cannot produce enough chips to meet demand. Chief Financial Officer David Zinsner said supply should improve in the second quarter after hitting its lowest level in the first quarter.
Jefferies analysts expect the supply shortage to bottom out in March. Oppenheimer also believes conditions will ease by the second quarter.
Weak Forecasts Trigger Heavy Selling
Friday’s stock drop followed Intel’s quarterly profit and revenue forecasts, which missed market expectations. If losses continue, Intel could lose more than $35 billion in market value.
“The server cycle looks real, but Intel underestimated it and failed to prepare its capacity,” Bernstein analysts said.
Production Challenges and Memory Shortages Add Pressure
Intel still faces difficulties adjusting its production mix. These issues slow efforts to increase output of high-demand data-center processors.
A global memory shortage has added further pressure. Rising memory prices may weaken demand in the personal computer market, which remains Intel’s largest revenue segment.
Panther Lake Chips Face Market Headwinds
Intel expected its upcoming Panther Lake PC processors to help regain market share lost to AMD over recent years. Current market conditions, however, may limit that recovery.
Investors Watch CEO Lip-Bu Tan’s Strategy Closely
Investors continue to monitor Intel’s restructuring under CEO Lip-Bu Tan. He has focused on cutting costs and scaling back ambitious contract manufacturing plans.
Before earnings, hopes for new external customers supported the stock. After results, Tan said two potential customers had only reviewed the technical details of Intel’s upcoming 14A manufacturing technology.