Intel Corporation (INTC.US) Plunges 29%, Largest Single-Day Drop Since the 1970s, as Guidance Falls Far Short of Expectations

Intel Corporation (INTC.US) plunged 29% on Friday, marking its largest single-day drop since the 1970s. The move followed the company's fourth-quarter guidance, which fell far short of market expectations, weighed down primarily by an accident at its Israeli chip plant and continued weakness in the personal computer (PC) market. The news dealt a heavy blow to investor confidence in Intel Corporation's business recovery and once again put the company's transformation plan, championed by CEO Chen Liwu, under severe scrutiny. Intel Corporation's earnings report released after the bell on Thursday showed the company expects fourth-quarter revenue of $15 billion to $16 billion and adjusted earnings per share of $0.25, both well below market expectations. According to LSEG data, analysts had previously expected Intel Corporation to report fourth-quarter revenue of $17.1 billion and adjusted earnings per share of $0.43. Intel Corporation Chief Financial Officer David Zinsner said the PC market downturn is expected to persist at least through the first half of 2027. "We believe the PC market slowdown will continue at least through the first half of next year," Zinsner said, adding that the company will continue to invest prudently in capacity and working capital to expand supply and support future growth. Weak PC market demand is closely tied to rising costs for components such as memory chips. Data from market research firm Counterpoint Research showed that global PC shipments fell 4% year over year in the second quarter of 2026, reflecting how cost pressures are dampening end-market demand. In addition to weak industry demand, an explosion earlier this month at Intel Corporation's chip manufacturing plant in Israel further hit the company's production and delivery capabilities. The accident killed two employees and seriously injured another, and led to a prolonged plant shutdown that affected shipments of Intel Corporation's 10-nanometer chips. Chen Liwu called it "an unfortunate and tragic accident" on the earnings call and said the extended plant shutdown had a clear impact on product supply. Zinsner expects the accident to cost Intel Corporation about $600 million in revenue over two quarters. Shares had risen 150% year-to-date at one point; Wall Street questions Intel Corporation's recovery prospects The plunge is especially painful for Intel Corporation because, before the earnings release, the stock had gained about 150% year-to-date. Previously, the market had high hopes for Intel Corporation's recovery prospects, partly because the rapid development of agentic AI applications has renewed attention on the importance of central processing units (CPUs), fueling expectations for stronger demand for related products. However, the latest guidance shows that Intel Corporation still faces clear operating challenges, especially weakness in its PC business and uncertainty in manufacturing. D.A. Davidson analysts downgraded Intel Corporation to "neutral" from "buy" on Friday, expressing concerns about the company's recovery progress. The analysts said that while they understand the PC market is facing industry-wide pressure, the current valuation level remains difficult to justify given the extent of Intel Corporation's business weakness. The sharp drop in Intel Corporation's stock also sharply reduced the value of prior investments in the company by the U.S. government and NVIDIA Corporation (NVDA.US). The Trump administration last year pushed for the U.S. government to take a 10% stake in Intel Corporation to support the development of advanced chip manufacturing in the United States. Although that investment remains profitable, Friday's plunge reduced the market value of the U.S. government's stake by about $12 billion. Meanwhile, NVIDIA Corporation's prior $5 billion investment in Intel Corporation saw the market value of its stake shrink by about $6 billion on Friday. Foundry business remains key to transformation; advanced process has yet to win external customers For Chen Liwu, who became CEO in March 2025, Intel Corporation's earnings miss is undoubtedly a major setback. Since taking office, Chen Liwu has been committed to driving the company's business recovery and hopes to help Intel Corporation make up for opportunities missed in the early stages of the AI wave. Among these efforts, the foundry business is regarded as an important part of Intel Corporation's transformation strategy. Intel Corporation is the only U.S.-based company with advanced logic chip manufacturing capability and has now achieved mass production of its most advanced 18A process chips at its new Arizona plant, hoping to offer customers an advanced chip manufacturing alternative to Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US). The company's next wafer fab in Arizona is expected to begin operations by the end of 2028. However, despite progress in advanced processes, Intel Corporation has yet to secure external customers for its new-generation chip manufacturing business, and the commercialization outlook for the foundry business remains uncertain. Chen Liwu said on the earnings call that the company expects several customers to be ready to publicly announce partnerships over the next two quarters, while Intel Corporation is making "huge progress" on its next-generation 14A process technology. Tech stock selloff spreads; Nasdaq falls nearly 3% As Intel Corporation shares plunged, the U.S. tech sector was undergoing a broad selloff. On Friday, the Nasdaq Composite fell 2.9%, capping a week of disappointing earnings from tech giants. Earlier, Alphabet Inc. Class C parent Alphabet (GOOGL.US) plunged more than 12% on Thursday, its largest single-day drop since listing, and extended losses on Friday. Amazon.com, Inc. (AMZN.US) also fell 1.4% on Friday. The company had previously reported third-quarter revenue and profit below market expectations while maintaining its forecast for 2026 capital expenditures of $220 billion. Notably, Amazon.com, Inc. posted negative free cash flow for a second consecutive quarter, and the cash flow shortfall widened further from the previous quarter, intensifying market concerns about returns on AI investment by tech giants. Other semiconductor stocks also came under pressure. NVIDIA Corporation fell 4% on Friday, Broadcom Inc. (AVGO.US) dropped more than 5%, and Qualcomm (QCOM.US) plunged 11%. As tech companies continue to pour huge sums into building AI infrastructure, investors are increasingly focused on whether those investments can actual returns within a reasonable timeframe. However, Matt Orton, chief market strategist at Raymond James, believes the recent pullback in tech stocks does not mean the industry's fundamentals have fundamentally deteriorated. He said the market now needs to re-examine concentration and valuation levels in the tech sector rather than view the selloff as an industry-wide crisis. "I don't think this is a moment of broad reckoning for the market, but investors should indeed think carefully about the fact that, despite still-strong fundamentals, positioning in the tech sector remains too concentrated."