Intel warning sparks chip rout as PC weakness clouds turnaround

Intel Warns of Prolonged PC Market Weakness, Triggering Semiconductor Selloff

Intel's Bleak Forecast and Its Impact on the Semiconductor Industry

By Anhata Rooprai

Intel Shares Plunge After Weak Forecast

Oct 30 (Reuters) - Intel's shares slumped 25% in premarket trading after the chipmaker forecast a bleak quarter and warned of persistent weakness in the personal computer market through at least the first half of 2027, sparking a selloff in global chip stocks.

The decline puts the US chipmaker, which forecast fourth-quarter revenue and profit below Wall Street expectations, on track to lose more than $123 billion in market value and open at its lowest level in about six months if losses hold through the regular trading session.

CEO Lip-Bu Tan's Turnaround Efforts

The forecast underscores the challenges facing CEO Lip-Bu Tan's turnaround effort, with Intel still grappling with a prolonged PC market slump even as it invests heavily in AI and manufacturing expansion.

Global Semiconductor Stocks React

Semiconductor stocks, including Advanced Micro Devices, Arm Holdings, Qualcomm, Nvidia, Broadcom and Micron, fell between 2% and 9% in premarket trading.

The STOXX Europe 600 Technology Index was down 2.1%, with sector heavyweight ASML shedding 5.2%. US-listed shares of the world's largest contract chipmaker, TSMC, were down 3.5%.

Intel's Financial Outlook

Intel expects fourth-quarter revenue of $15 billion to $16 billion, below analysts' average estimate of $17.07 billion, according to data compiled by LSEG.

Finance chief David Zinsner also said Intel does not expect positive cash flow this year.

Memory Market Pressures

Memory Crunch Bites

MEMORY CRUNCH BITES

Impact of High-Bandwidth Memory Chips

Higher memory prices, driven by suppliers shifting capacity toward AI-focused high-bandwidth memory chips, are raising PC costs and weighing on already weak consumer demand.

PC Segment Revenue Decline

PC chips accounted for roughly half of Intel's third-quarter revenue, and the company expects sales from the segment to decline more than 20% sequentially this quarter after a 5% drop in the September period.

Analyst Commentary

"It will be important to see if Intel can expand the highly profitable Xeon product supply to help offset this developing weakness in PC," said Brian Mulberry, chief market strategist at Zacks Investment Management.

"Bottom line, weaker sales volumes, higher manufacturing costs, and an out-of-cycle product mix is a recipe for the stock to decline over the near term as future earnings are under a lot of pressure."

Reporting Credits

(Reporting by Anhata Rooprai in Bengaluru, additional reporting by Sudeshna Ghoshal; Editing by Shinjini Ganguli)