Intel Earmarks $100bn to bolster Manufacturing after Stock Falls Over 12%

The shares of Intel fell by more than 12 per cent on Friday, due to the surge in artificial intelligence (AI) investments by competitors. 

Following a disappointing forecast, signalling a shift in enterprise spending away from its traditional data centre chips due to the surge in artificial intelligence (AI) investments.

Reuters reported that Intel's second-quarter revenue projection of $12.5 billion to $13.5 billion fell short of analysts' expectations, which averaged $13.57 billion, according to LSEG data. 

The decline reflects Intel's struggle to keep pace with competitors like Nvidia (NVDA.O) in producing advanced AI chips and components, with the stock having dropped approximately 30% since the beginning of the year.

Commenting on the situation, Bernstein analysts expressed scepticism about Intel's prospects, stating, "While we believe they are doing everything they can to try to repair things, it is clear the company is profoundly broken, and it will take years to see the fruits of their (currently exhaustive) labor." 

In response to the mounting challenges, Intel has announced plans for a $100 billion spending initiative across four U.S. states to bolster its manufacturing capabilities.

Additionally, the company unveiled a new AI chip earlier this year in a bid to remain competitive in the rapidly evolving market. 

The significant drop on Friday is expected to wipe out nearly $19 billion from Intel's market value, which stood at $149.4 billion as of Thursday's market close. 

Businesses are increasingly prioritizing investments in advanced AI server chips, diverting demand away from Intel's central processing units (CPUs), which have traditionally powered data centers. 

While acknowledging the launch of Intel's Gaudi 3 AI chip, analysts at Goldman Sachs expressed concerns that the company may continue to lose market share to competitors like Nvidia and Arm in the broader data center compute market.