After several advances with investors, Intel (INTC) is now taking a few steps back.
Shares of the chipmaker fell 8% on Friday after multiple setbacks in its first-quarter results and second-quarter guidance. While the company’s first-quarter earnings beat forecasts by $0.05, forecasts for the remainder of the year fell short of consensus.
“A lot of great things happen in the second half of the year. We are very pleased with our prospects,” Intel CEO Pat Gelsinger told Yahoo Finance.
The selling pressure on Intel shares comes from two areas.
First, quarterly results were impacted by a wafer supply issue that Wall Street couldn’t properly model.
And second, there’s been some softening in customer demand — leading Intel executives to be cautious about second-quarter guidance.
Intel expects second-quarter sales of between $12.5 billion and $13.5 billion. Analysts had expected $13.63 billion. Earnings are forecast at $0.10 per share, below analyst forecasts of $0.24.
“We believe Intel has a difficult road ahead as the company begins a multi-year transition period that includes high capital intensity and an ambitious design roadmap with the expectation of undergoing five process node transitions within four years,” said Stifel analyst Ruben Roy in a customer note.
Roy maintained a Hold rating on Intel shares.
The company’s tepid guidance overshadowed some gains in the quarter and the past two months.
Gelsinger noted that Intel expects to ship more than 40 million AI PCs in 2024, a slight improvement over its previous forecast. All of the company’s planned chip launches for the year remain on track, Gelsinger added.
Intel recently unveiled a number of AI-focused products and services. On display was Gaudi 3, an AI chip for generative AI software that will be available later this year.
The company also unveiled its Core Ultra processor, aimed at the aforementioned emerging AI PC market.
And just last month, Intel received $8.5 billion in grants and another $11 billion in loans from the Biden administration to build semiconductor factories in four states. The expansions are part of Intel’s goal to become a leading maker of chips for other companies, competing with No. 1 vendor Taiwan Semiconductors (TSMC).
JPMorgan analyst Harlan Sur said: “While we continue to be impressed with current execution, the next 12 months will be the team’s most challenging as they launch two data center products and two large customer products across three new production technology nodes.” – However, we believe it will serve as a strong indicator of the team’s performance over the next three to five years.”
The sentiment around technology stocks
Intel’s below-consensus earnings and muted outlook come at a time when the threat of longer-term higher interest rates is weighing on once-beloved technology stocks like Nvidia (NVDA). Building AI infrastructure can also be more costly than expected, as expressed in the first quarter earnings releases of Meta (META), Alphabet (GOOG, GOOGL), and Microsoft (MSFT).
So what’s the next move for tech stocks? Yahoo Finance checked out the latest episode of the Opening Bid podcast (below).
Brian Sozzi is Editor-in-Chief of Yahoo Finance. He also hosts the “Opening bid‘Podcast. Follow Sozzi on Twitter/X @BrianSozzi and further LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected]. Are you a CEO and want to join Yahoo Finance Live? Email Brian Sozzi.
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