Why Intel Stock Crashed on Friday
Key Points
Surging memory prices are denting Intel's PC chip sales.
Supply shortages are likely to persist into 2027 and perhaps even longer.
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Shares of Intel (NASDAQ:INTC) plunged more than 28% on Friday after the chipmaker's fourth-quarter revenue and earnings guidance drove traders to the exits.
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PC weakness offsets AI gains
Intel's third-quarter revenue rose 21% year over year to $16.5 billion.
The semiconductor giant's data center and artificial intelligence (AI)-related sales grew at a blistering pace, rising 78% to $7.3 billion.
Yet its client computing segment suffered a 5% decline in revenue to $8.1 billion. During a conference call with analysts, CEO Lip-Bu Tan said the soaring prices of memory chips were straining corporate IT budgets and denting customer demand for personal computer (PC) processors.
Still, Intel's data center gains drove its adjusted net income up by 169% to $2.8 billion, while its adjusted earnings per share increased 126% to $0.52.
The PC market could take years to recover
Investors, however, appeared to be more concerned with Intel's guidance. Management forecast fourth-quarter revenue of $15 billion to $16 billion and adjusted earnings per share of $0.25. That was well below Wall Street's estimates, which had called for revenue of $17.1 billion and per-share profits of $0.43.
Tan said an accident at Intel's factory in Israel led to an extended shutdown that will reduce the company's server chip shipments.
Analysts are also concerned that memory chip shortages will persist for years, which could make it hard for Intel's PC business to rebound. Earlier this month, South Korean chipmaker SK Hynix said it expects memory chip demand to exceed supply through the end of the decade.
"We see the PC slowdown continuing at least through the first half of next year," chief financial officer David Zinsner said.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel. The Motley Fool has a disclosure policy.
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