Intel shares plunged by as much as 17% on Friday after the chipmaker admitted it was struggling to meet demand for its high-powered AI chips.
The Santa Clara, Calif.-based firm, which makes chips needed for data centers, is in the midst of a turnaround effort as it looks to capitalize on surging demand from tech giants who need chips and servers to power the artificial intelligence boom.
During a call with investors, Intel executives, including chief financial officer David Zinser, admitted that supplies had ran in part because they underestimated demand.
ZInser said he expects shortages would continue in the first quarter but should begin to improve by mid-year.
“The server cycle seems real, but the company appears to have woefully misjudged it with its capacity footprint caught massively off guard,” Bernstein analysts said in a note.
In the fourth quarter, Intel reported a net loss of $333 million, worse than Wall Street had expected.
The company projects a loss of 21 cents per share in the first quarter as it ramps up spending to address the shortfall.
The dismal results marked a major setback for Intel, whose shares had surged 84% last year, driven in part by investor optimism over major investments by the US government, investment giant SoftBank and Nvidia.
Intel has struggled with low manufacturing yields, which refers to the number of viable chips produced at its plants.
Intel CEO Lip-Bu Tan said the company was “working tirelessly to drive efficiency and more output” and was on what he described as a “multiyear journey” to boost production.
“While yields are in line with our internal plans, they are still below what I want them to be,” Tan said during a conference call on Thursday. “Accelerating yield improvement will be important lever in 2026 as we look to better support our customers.”
With Post wires
