Five of the biggest US chipmakers were close to losing nearly $15 billion in market value on Friday after Intel Corp stunned Wall Street with dismal earnings forecasts, stoking fears of a crash in the personal computer market.
The company predicted a surprise loss for the first quarter and its revenue forecast was $3 billion, which was below estimates, as it also faces slowing growth in the data center business.
Intel shares fell 8.2% before the opening of the session, and its rivals Advanced Micro Devices, Nvidia, Applied Materials y Qualcomm they lost between 0.4% and 2.4 percent. Intel supplier KLA Corp was down 6% after its own dismal forecasts.
There are no words to describe or explain Intel’s historic plunge,” said Hans Mosesmann of Rosenblatt Securities, one of 21 analysts who cut their price targets.
The poor outlook underscored the challenges facing Chief Executive Pat Gelsinger as he tries to re-establish Intel’s dominance in the industry by expanding contract manufacturing and building new factories in the United States and Europe.
The company has continued to lose market share to rivals such as AMDwhich has turned to contract chipmakers such as Taiwan’s TSMC to produce chips that outperform its technology.
According to Matt Wegner, an analyst at YipitData, “AMD’s Genoa and Bergamo (for data center) chips have a big price-performance advantage over Intel’s Sapphire Rapids processors, which should drive further share gains.” from AMD”.
“It is now clear why Intel needs to cut so much cost, as the company’s original plans turn out to be fanciful,” said the Bernstein brokerage. “The magnitude of the impairment is staggering, bringing potential concern to the company’s cash position over time.”
Intel, which plans to cut $3 billion in costs this year, generated $7.7 billion of cash from operations in the fourth quarter and paid dividends of $1.5 billion.
With capital spending estimated at around $20 billion in 2023, analysts say the company should consider cutting its dividend.
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