About $8 billion was taken off market value of intel on Friday as a result of the American chipmaker’s gloomy earnings forecasts, which stoked concerns about a downturn in the personal computer market.
The company expected a first-quarter surprise loss and projected revenues that were $3 billion below expectations while battling the data centre industry’s slowing growth.
While Intel’s stock completed the day down 6.4%, shares of rival firms Advanced Micro Devices and Nvidia ended the day up 0.3% and 2.8%, respectively. Supplier KLA to Intel ended 6.9% behind expectations.
One of the 21 analysts that lowered their price expectations for the business was Hans Mosesmann of Rosenblatt Securities. He said that “no words can represent or depict the historic collapse of Intel.”
The gloomy outlook brought to light the challenges facing Chief Executive Pat Gelsinger as he attempts to reestablish Intel’s market supremacy by increasing contract manufacturing and erecting new facilities in the US and Europe.
As a result of competitors like AMD using contract chipmakers like Taiwan’s TSMC to produce processors that surpass Intel’s capabilities, the corporation has been progressively losing market share.
According to Matt Wegner, analyst at YipitData, “AMD’s Genoa and Bergamo (data centre) chips offer a solid price-performance advantage compared to Intel’s Sapphire Rapids CPUs, which could drive additional AMD market increases.”
The business would have lost even more market share by the time the data centre industry bottoms out, which is predicted to happen in the second half of 2022, according to analysts, putting Intel at a disadvantage.
Since the company’s initial ambitions have shown to be unrealistic, it is now obvious why Intel needs to reduce costs so drastically, stockbroker Bernstein stated.
The extent of the decline is astounding, and it may eventually cause problems for the company’s financial situation.
In the fourth quarter, Intel earned $7.7 billion in cash from operations and paid $1.5 billion in dividends. The company intends to reduce expenses by $3 billion this year.
Analysts advised the corporation to think about reducing its dividend since capital expenditures are anticipated to be about $20 billion in 2023.