Intel, the semiconductor giant with the U.S. government as its largest investor, reported on Thursday that the artificial intelligence boom is acting as a double-edged sword for its operations. While the Silicon Valley company posted a 21% year-over-year revenue increase to $16.5 billion for the third quarter, this growth was primarily fueled by surging demand for chips designed to manage agent-style AI services in data centers.
However, the same AI-driven demand has created a shortage of memory chips essential for manufacturing personal computers. Facing significant price increases for these components, PC makers have raised their own prices and reduced shipment volumes, directly impacting Intel's core business of selling processor chips for PCs. Consequently, Intel projected revenue and profits for the current quarter that fall below Wall Street expectations.
David Zinsner, Intel's chief financial officer, attributed the market weakness observed toward the end of August specifically to rising memory prices. With these supply chain issues expected to persist, the company forecasted fourth-quarter revenue between $15 billion and $16 billion, a figure notably lower than the approximately $17 billion anticipated by analysts. Additionally, Intel estimated that its gross profit margin would decline to 37% in the upcoming period, down from 43% in the third quarter.
Following the announcement, Intel's stock price plunged 20% in after-hours trading before experiencing a slight rebound. The shares, which had surged earlier in the year, have already slid more than 30% since September amid broader industry concerns regarding a potential slowdown in AI spending.
Sources: The New York Times Technology.