Intel Stock Suffers Worst Crash in 50 Years as Weak Forecast Overshadows AI Chip Demand
In brief
- Intel shares plunged nearly 30% to $65.76 on Friday, wiping out more than $146 billion in market value as investors reacted to a disappointing fourth-quarter forecast.
- Intel expects Q4 revenue of $15 billion to $16 billion, well below Wall Street's $17.07 billion estimate, while adjusted earnings per share are forecast at $0.25 versus expectations of $0.43.
- Demand for AI server processors is booming, but manufacturing and packaging shortages are limiting production. Meanwhile, Intel expects the PC market to contract through 2027 and warned it probably won't generate positive free cash flow next year.
Intel shares plunged nearly 30% to $65.76 on Friday after the chipmaker issued a fourth-quarter forecast that fell well short of Wall Street expectations, overshadowing an otherwise strong earnings report.
The selloff wiped out more than $146 billion in market value, and translated into the worst single-day decline in more than 50 years.
The problem is that Intel finds itself in an unusual position: demand for its processors is booming because of the AI infrastructure buildout, but the company cannot manufacture enough chips to capitalize on it. At the same time, its traditional PC business is struggling, and the factories needed to support its long-term recovery are consuming enormous amounts of money.
Intel's third-quarter numbers were actually quite good. Revenue climbed 21% year over year to $16.5 billion, while adjusted earnings per share reached $0.52, beating the company's guidance of $0.38 and Wall Street's $0.40 estimate. It was the company's eighth consecutive quarter of exceeding its financial expectations, according to CFO Dave Zinsner.
The strongest performer was Intel's Data Center and AI division, which generated $7.3 billion in revenue, up 78% year over year and nearly 80% compared with the same period last year. The division's operating profit reached $3 billion, representing 42% of its revenue.
But investors were looking at what comes next. Intel expects fourth-quarter revenue between $15 billion and $16 billion, meaning its midpoint guidance of $15.5 billion is roughly $1.6 billion below the $17.07 billion analysts had anticipated. Adjusted earnings per share are expected to fall to $0.25, compared with Wall Street's $0.43 estimate.
→Gross margins, which measure how much revenue remains after accounting for the direct costs of making products, are also expected to deteriorate. Intel forecast a non-GAAP gross margin of 38% for Q4, down from 44.1% in the third quarter.
Three problems explain much of that deterioration: weaker PC demand, manufacturing constraints affecting server processors, and an accident at one of Intel's factories in Israel.
Intel CFO Dave Zinsner described 2027 as an investment year and warned investors not to expect positive free cash flow. Free cash flow is the money a company has left after paying operating expenses and investments in equipment and infrastructure. Intel expects to sacrifice cash generation in the short term to finance its manufacturing expansion.
"Probably not a dynamic where we are going to have positive free cash flow next year," Zinsner said during the earnings call. He added that Intel expects a return on invested capital of at least 20% on its manufacturing node investments, but acknowledged that several major projects will require substantial spending at the same time.
That spending is part of Intel's broader attempt to rebuild its manufacturing business and compete with Taiwan Semiconductor Manufacturing Company, or TSMC, the world's leading contract chipmaker. Intel wants to manufacture chips not only for its own products but also for outside customers, a business model known as a foundry.
The turnaround has attracted major partners. In September 2025, Nvidia invested $5 billion in Intel and agreed to collaborate on custom processors for PCs and data centers. The partnership gave Intel a financial boost while connecting its processors to Nvidia's AI ecosystem.
Intel's next-generation 18A process, the manufacturing technology behind chips such as Panther Lake, is central to the company's attempt to regain its technological edge.
More recently, a preliminary agreement with Apple to manufacture some of its chips helped send Intel shares above $130 in May. The potential deal could give Intel a significant new customer as Apple looks to diversify its manufacturing supply chain.
Those developments helped fuel optimism around Intel's recovery, but Friday's selloff shows how much still needs to go right. The company has strong demand in its data center business, yet it must increase manufacturing output, navigate a shrinking PC market and finance an expensive expansion before investors can expect consistent cash generation.
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