Intel shares nosedived 29% Friday, marking their worst single-day performance since the 1970s. The sharp decline followed the company's announcement of weaker-than-expected guidance, attributed mainly to a plant shutdown in Israel and struggles in the PC market.
This is a major setback for Intel, which has been aiming to catch up in the artificial intelligence race. The stock's plunge also impacted the U. S. government. Over a year ago, during the Trump administration, they purchased a 10% stake in Intel. Though still profitable, their investment's value dropped by about $12 billion on Friday alone.
Nvidia saw its stock value diminish by around $6 billion. Before Intel's earnings report Thursday, its shares had surged about 150% this year. Rising demand for central processors critical to AI workloads fueled this surge.
Analysts from D. A. Davidson downgraded Intel's stock to neutral from buy, expressing concerns about its valuation. Their report, titled "Not fixed yet, " pointed out significant weakness in the PC market affecting the entire industry.
Friday was tough for other tech giants too. Amazon shares fell 1.4% after missing third-quarter earnings and reaffirming its 2026 capital expenditure forecast of $220 billion. The company also reported a second consecutive quarter of negative free cash flow, with an increase from the previous period.
The Nasdaq Composite ended the week down 2.9%, reflecting a wave of disappointing tech earnings. Alphabet had its worst day on record Thursday, dropping over 12%, and continued its decline Friday. Other semiconductor companies were also hit; Nvidia fell 4%, Broadcom over 5%, and Qualcomm tumbled 11%.
Investor anxiety is rising over massive AI investments by major tech firms and uncertainty about returns. Matt Orton, chief market strategist at Raymond James, told CNBC's "Squawk Box Europe" that while this isn't a moment of reckoning, it's a time for investors to reassess their positions in the crowded tech space.
For Intel, the disappointing forecast highlights a PC market battling rising costs for memory and other components. Global PC shipments fell 4% in the second quarter compared to last year. Intel forecasts adjusted earnings per share of 25 cents for the current quarter, with revenue between $15 billion and $16 billion. This falls short of analysts' expectations of $17.1 billion in revenue and 43 cents EPS, according to LSEG.
The guidance also includes the impact of an explosion at a fab in Israel earlier this month. The incident, resulting in two fatalities and one serious injury, is expected to cost Intel about $600 million in lost revenue over two quarters. The explosion was called an "unfortunate and tragic accident" leading to an "extended shutdown" at the plant, affecting shipments of 10-nanometer chips.
A key part of Intel's strategy to rejuvenate its business is its foundry operations, which have struggled to gain momentum. Intel remains the only U. S.-based manufacturer of advanced logic chips and has started high-volume production of its most advanced 18A chip at its new Arizona fab. This offers an alternative to Taiwan Semiconductor Manufacturing Co. The next Arizona fab is expected to start operations by the end of 2028. However, Intel has yet to secure external customers for its new chips.
Intel remains optimistic about its trajectory, stating it is making "significant progress" on its upcoming 14A chips and expects to announce a couple of customers in the next two quarters.
