Intel Faces AI Data Center Demand Challenge; Shares Plunge 13%

Intel is currently grappling with challenges in meeting the rising demand for its AI data center server chips. This situation has led to a notable decline in its stock price, which dropped by 13% in after-hours trading.

Forecast and Financial Performance

On January 22, 2023, the company revealed that it anticipates quarterly revenue between $11.7 billion and $12.7 billion. This forecast falls short of the analysts’ average estimate of $12.51 billion. Additionally, Intel expects to break even on adjusted earnings per share, contrasting sharply with the expectation of earning 5 cents per share.

CEO’s Insights on Demand and Production

Intel’s Chief Executive Officer, Lip-Bu Tan, expressed disappointment over the company’s inability to fully meet market demands. Despite operating factories at full capacity, Intel struggles to keep pace with demand for server chips. This shortfall has resulted in missed opportunities in lucrative data center sales.

Market Context and Competitive Landscape

• AI-related demand has caught several cloud-computing giants off guard.
• Intel faces increasing competition from market leaders like Nvidia.
• The chip manufacturing landscape is evolving rapidly, affecting companies’ production strategies.

Strategic Changes and Future Directions

In response to these challenges, Tan is implementing a turnaround strategy focused on cost reduction and a new product roadmap. The company is re-evaluating its investment in next-generation manufacturing technologies, specifically its 14A process.

Potential New Partnerships

Two customers are currently assessing the technical aspects of Intel’s 14A technology, with the potential for creating test chips. Intel hopes to have more information on customer interest by the second half of the year.

Financial Recovery Timeline

Intel’s financial performance took a hit in 2024, with a 60% drop in share price. However, shares rebounded with an 84% increase in 2025, significantly outperforming the semiconductor index’s 42% rise.

Chip Production and Yield Challenges

Intel has begun shipping its new “Panther Lake” PC chips, which utilize their new 18A manufacturing technology. Analysts predict that the ramp-up of production may negatively impact margins. Reports indicate that only a small fraction of chips produced using this technology currently meet quality standards.

Future Outlook

While Intel’s yields are reportedly improving, they remain below desired levels. Additionally, the global shortage of memory chips has inflated prices, impacting the personal computer market. The company expects supply to be most constrained in the first quarter of the year but anticipates improvement moving forward.

Intel continues to face significant competition in the PC market from rivals like AMD and Arm Holdings, highlighting the need for ongoing adaptation in its strategies and offerings.