Intel shares plummet 14% as supply chain hampers turnaround

Shares of Intel fell 14% on Friday after the company struggled to meet strong artificial intelligence-driven demand for data center chips due to supply constraints, disappointing investors betting on the turnaround.After years of riding out the AI ​​boom that made Nvidia the most valuable company in the world, Intel is finally enjoying a surge in demand for its traditional server chips used alongside high-end graphics processors in data centers.

That and high-profile investments from the US government, SoftBank and Nvidia have reignited investor interest. Intel shares outpaced most semiconductor companies last year with an 84% gain and have continued their rally through 2026, up 47% in January so far.“The rally was largely driven by ‘the dream’ and not by reality or near-term fundamentals,” TD Cowen analysts said.

Intel can’t keep up with demand even as it runs factories at full capacity, but Intel CFO David Zinsner said he expects available supply to improve in the second quarter after hitting record lows in the first quarter.

Jefferies analysts also noted that Intel’s supply shortage will likely bottom out in March, while brokerage Oppenheimer said restrictions will ease in the second quarter.

Friday’s losses followed quarterly profit and revenue expectations that came in below expectations. If losses continue, the decline will wipe more than $35 billion from Intel’s market value. “The server cycle seems real, but the company appears to have misjudged it woefully as the capacity footprint is hugely overwhelmed,” Bernstein analysts said.

The company has faced a delay in changing the type of semiconductors it makes, hampering efforts to increase production of in-demand data center processors.

Also weighing on Intel’s forecast was the global memory supply shortage, with price increases expected to dampen end-market demand in the personal computer market – Intel’s largest segment, where the new “Panther Lake” PC chips were expected to spark a comeback after years of market share losses for AMD.

Investors are closely watching Intel’s turnaround under CEO Lip-Bu Tan, who has focused on cutting costs and scaling back its massive contract manufacturing ambitions.

The prospect of new announcements from external customers had contributed greatly to Intel’s recovery ahead of the results, but Tan’s comments on a post-earnings call indicated that two customers had only gone so far as to evaluate the technical details of the upcoming 14A production technology.