Intel’s stock experienced a significant drop, plunging over 17% following the release of its fourth-quarter earnings report. The chip giant issued a disappointing outlook for the upcoming quarter, citing persistent manufacturing and supply chain issues that are hindering its ability to meet demand, particularly for its server chips crucial for AI data centers. This downturn marks the stock’s worst performance since August 2024, as investor hopes for a swift turnaround are met with the harsh reality of ongoing production challenges.
Manufacturing and Supply Chain Challenges
During a fourth-quarter earnings call, CEO Lip-Bu Tan acknowledged that Intel is struggling to meet full demand for its products, with production efficiency, or yield, falling below targets. He described the recovery as a “multiyear journey” requiring time and resolve. The company’s first-quarter revenue is projected to be between $11.7 billion and $12.7 billion, with adjusted earnings per share expected to break even, missing analyst consensus.
These supply constraints are particularly impacting the demand for server chips used in artificial intelligence data centers. While Intel’s Panther Lake processors, made with its 18A manufacturing process, have shown promise, analysts at RBC Capital Markets suggest that a meaningful revenue contribution from its next-generation 14A technology may not materialize until late 2028. Jefferies analysts noted a lack of a clear path forward, citing continued share loss and an unclear strategy for fab and packaging opportunities.
Foundry Business Outlook
Investors have been keenly watching Intel’s foundry business, which manufactures chips for external clients, as a potential growth driver. While the company anticipates customer announcements for its 14A technology in the latter half of 2026 or early 2027, the actual revenue impact is not expected until 2028 or 2029. This long timeline, coupled with ongoing market share losses to competitors like AMD and Arm in the CPU market, raises concerns about the cost-effectiveness of Intel’s manufacturing segment without substantial external contracts.
The company’s struggles in its foundry business, which has faced years of delays and missteps, make it difficult to compete with rivals like TSMC. Analysts suggest that fixing these deep-rooted manufacturing issues could take a decade. Furthermore, a memory chip shortage could also impact Intel’s revenue by affecting the end demand for products that incorporate its chips, potentially increasing prices for PCs and data center servers.
Market Reaction and Future Prospects
The disappointing guidance overshadowed Intel’s fourth-quarter performance, which did exceed Wall Street’s expectations. The stock’s sharp decline reflects a significant disconnect between the recent hype surrounding Intel, fueled by investments from the U.S. government and Nvidia, and its current operational realities. With upcoming earnings reports from other major tech companies like Apple, Tesla, and Microsoft, investors will be closely monitoring their outlooks for signs of continued growth in the tech sector.