Intel plunges 25%, triggers global chip rout on bleak outlook

Oct 30 : Intel tumbled 25 per cent in premarket trading on Friday on a bleak outlook, deepening a broader retreat in technology stocks as investors grew increasingly wary of weakening PC demand and the vast spending required to build out AI infrastructure.

The forecast underscores the challenges facing CEO Lip-Bu Tan's turnaround effort, with Intel still grappling with a prolonged PC market slump even as it invests heavily in AI and manufacturing expansion.

Semiconductor stocks, including Advanced Micro Devices, Arm Holdings, Qualcomm, Nvidia, Broadcom and Micron, fell between 2 per cent and 9 per cent in premarket trading.

"The market is in a sell first, ask questions later mood right now, and Intel's warning has given investors an easy excuse to take some money off the table across chip stocks," said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

The selloff spread to server makers, reflecting investor caution toward companies tied to the semiconductor and AI infrastructure supply chain.

Shares of server makers Dell Technologies, Hewlett Packard Enterprise and Super Micro Computer fell between 6 per cent and 12 per cent in premarket trading.

The STOXX Europe 600 Technology Index fell 2 per cent, with sector heavyweight ASML shedding 5.4 per cent. U.S.-listed shares of TSMC, the world's largest contract chipmaker, fell 3.9 per cent.

Intel was on track to lose more than $123 billion in market value and open at its lowest level in about six months if the premarket losses held.

The US chipmaker forecast fourth-quarter revenue of $15 billion to $16 billion, below analysts' average estimate of $17.07 billion, according to data compiled by LSEG.

Finance chief David Zinsner also said Intel does not expect positive cash flow this year.

MEMORY CRUNCH BITES

Higher memory prices, driven by suppliers shifting capacity toward AI-focused high-bandwidth memory chips, are raising PC costs and weighing on already weak consumer demand.

PC chips accounted for roughly half of Intel's third-quarter revenue, and the company expects sales from the segment to decline more than 20 per cent sequentially this quarter after a 5 per cent drop in the September period.

"It will be important to see if Intel can expand the highly profitable Xeon product supply to help offset this developing weakness in PC," said Brian Mulberry, chief market strategist at Zacks Investment Management.

"Bottom line, weaker sales volumes, higher manufacturing costs, and an out-of-cycle product mix is a recipe for the stock to decline over the near term as future earnings are under a lot of pressure."