Intel shares suffered their worst day since the 1970s, plummeting 29% after issuing weaker-than-expected guidance due to a plant shutdown in Israel and ongoing softness in the PC market. This historic drop erased approximately $12 billion from the U.S. government’s investment in the chipmaker. The decline impacted broader tech stocks, with Amazon, Alphabet, and other semiconductor companies also experiencing significant losses.
Intel shares faced their steepest decline since the 1970s on Friday, plummeting 29% after the chipmaking giant issued surprisingly weak guidance. The company cited a combination of factors, including a recent plant shutdown in Israel and persistent sluggishness in the personal computer market. This significant downturn wiped approximately $12 billion off the U.S. government's stake in Intel, a substantial hit to its investment initiated over a year ago.
The dramatic drop marks a considerable challenge for CEO Lip-Bu Tan, who took the helm in March 2025 with a mandate to revitalize Intel after it missed out on the initial wave of the artificial intelligence boom. Despite the setback, the government's investment technically remains profitable, though its value took a substantial hit. Nvidia, which also holds a significant stake in Intel, saw its investment value fall by about $6 billion.
Before this earnings report, Intel's stock had surged roughly 150% this year, driven by strong demand for central processors essential for agentic AI workloads. However, analysts at D.A. Davidson swiftly downgraded the stock from 'buy' to 'neutral,' titling their report, 'Not fixed yet.' They acknowledged industry-wide impacts on the PC market but questioned Intel's valuation given the severity of the weakness.
Beyond Intel, the broader tech sector experienced a turbulent week. Amazon's shares dipped 1.4% on Friday following a third-quarter earnings miss and negative free cash flow for the second consecutive quarter, despite maintaining its ambitious $220 billion capital expenditure forecast for 2026. The Nasdaq Composite fell 2.9%, with Alphabet (Google's parent company) enduring its worst day on record on Thursday, plummeting over 12%, and continuing its slide into Friday. Other semiconductor players also felt the squeeze: Nvidia dropped 4%, Broadcom shed over 5%, and Qualcomm tumbled 11%.
Not a 'moment of reckoning'
Concerns are mounting among investors regarding the massive AI spending by tech giants and the potential returns on these investments. Matt Orton, chief market strategist at Raymond James, suggested this isn't a 'moment of reckoning' but rather an opportunity for investors to rethink crowded positions in the market, even with strong underlying fundamentals.
Intel's grim outlook is largely attributed to a beleaguered PC market, compounded by escalating costs for memory and other vital components. Counterpoint Research indicated a 4% year-over-year decline in global PC shipments during the second quarter. Intel projects adjusted earnings per share of 25 cents this quarter, with revenues estimated between $15 billion and $16 billion, significantly below analyst expectations of $17.1 billion in revenue and 43 cents EPS.
Intel's finance chief, David Zinsner, stated that the PC slowdown is expected to persist through at least the first half of next year, adding that the company remains committed to disciplined investments in capacity to support future growth. Adding to Intel's woes, an explosion at its Israeli fab earlier this month tragically killed two workers and severely injured another, an incident expected to cost the company approximately $600 million in lost revenue over two quarters. CEO Tan described the explosion as an 'unfortunate and tragic accident' leading to an 'extended shutdown' impacting 10-nanometer chip shipments.
A cornerstone of Tan's recovery strategy is Intel's struggling foundry business. As the sole U.S.-based manufacturer of advanced logic chips, Intel is now in high-volume production of its cutting-edge 18A chip at its new Arizona facility, aiming to provide an alternative to Taiwan Semiconductor Manufacturing Co. (TSMC). A second Arizona fab is slated for operation by late 2028. However, Intel currently has no external customers for its new chips, though Tan anticipates announcing a couple of customers in the next two quarters and reported 'tremendous progress' on upcoming 14A chips.
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