Intel Shares Plunge 12% Amid AI Chip Shortage

According to reports, Intel is struggling to meet the surging demand for AI chips, hitting its stock hard. Shares fell 12% in pre-market trading on Friday, wiping out roughly 21 billion USD in market value and disappointing investors who had pinned hopes on a strong recovery.

The company's stock soared last year—up 84%—and gained 47% in January, fueled by demand from AI-powered data centers, high-profile investments from Nvidia, and U.S. government support. Analysts, however, cautioned that much of this rally was driven by optimism rather than solid fundamentals. Intel's latest quarterly revenue and profit fell short of expectations, exposing supply constraints.

Despite running factories at full capacity, Intel cannot keep pace with market demand. CFO highlighted ongoing supply tightness, expecting a first-quarter low with improvements only in the second quarter. Analysts note that Intel's manufacturing adjustments lag behind rapid demand shifts, disrupting its production plans and limiting output of its sought-after data center processors.

Global memory shortages are expected to drive up prices, potentially slowing PC demand—Intel's largest business segment. The company had hoped its new "Panther Lake" chips could reclaim market share from AMD. Meanwhile, CEO Pat Gelsinger's transformation strategy and scaled-back foundry ambitions have attracted attention. Market expectations for Intel to secure major clients like Apple have been tempered, as only two customers are currently evaluating its advanced 14A process.

Intel's data center and AI divisions still grew 9% year-on-year, showing its CPUs' growing role in AI systems. Yet analysts warn that Intel remains structurally behind AMD in its product roadmap, potentially missing much of the AI-driven growth in the server market. Multiple institutions maintain cautious ratings, emphasizing that despite a booming chip industry, Intel has yet to demonstrate clear leadership in capitalizing on the AI surge.