Intel’s recent sharp sell-off has erased tens of billions of dollars in market value and exposed fractures in its much-touted comeback story, which had been largely fueled by optimism around the company’s renewed position in the artificial intelligence boom. Shares plummeted 14% after the semiconductor giant issued quarterly profit and revenue guidance that fell short of expectations, startling investors who had driven the stock up aggressively over the past year. If these losses hold, over $35 billion will be wiped from Intel’s market capitalization, a stark contrast to the company’s impressive 84% surge in 2025, which continued with a further 47% gain in January 2026.
The irony is palpable: for years, Intel watched as Nvidia dominated AI workloads with its graphics processors, but now it faces a different challenge—too much demand and not enough supply. Demand dynamics in data centers have shifted; while Nvidia’s GPUs remain essential for AI training and inference, they cannot function without traditional server CPUs to manage workloads and connect systems at scale. Intel, historically the leading supplier of these processors, is currently experiencing a surge in orders as data center operators rush to expand their capabilities.
This surge has rekindled interest in Intel’s core server business, persuading some investors that the company could still play a vital role in an AI-driven computing landscape. High-profile endorsements from the U.S. government, SoftBank, and even Nvidia itself have added further credibility to Intel’s turnaround narrative, emphasizing its strategic importance to the future of advanced chip manufacturing. However, high demand does not automatically translate into earnings when supply cannot be met. Intel’s factories are operating at full capacity, and the company has struggled to adjust its production mix swiftly toward the most sought-after data center processors. Chief Financial Officer David Zinsner acknowledged that available supply reached its lowest point in the first quarter, with improvements expected only from the second quarter onward.
Analysts generally concur with this timeline. Jefferies anticipates that the supply shortage will likely bottom out in March, while Oppenheimer projects that constraints will ease in the second quarter. Nonetheless, for a market that had anticipated a quicker return on AI-related demand, this delay has proven disappointing. “The rally had been largely driven by the dream rather than the near-term reality or fundamentals,” noted analysts from TD Cowen, reflecting a growing sentiment on Wall Street that Intel’s share price had outpaced its operational progress.
Bernstein analysts were more blunt, asserting that while the server upgrade cycle appears genuine, Intel has “woefully misjudged it,” leaving its capacity footprint “massively caught off guard.” Unlike fabless competitors that rely on external manufacturers, Intel must retool its own factories—an expensive and time-consuming process. Changing a fabrication plant’s focus is not a task that can be accomplished in weeks or even months, and this rigidity is hindering Intel’s ability to respond effectively to the AI-driven uptick in demand.
The challenges are compounded by Intel’s broader manufacturing transition. The company is in the midst of a complex effort to modernize its process technologies, regain chipmaking leadership, and attract external customers to its foundry business. Each of these objectives competes for capital, engineering resources, and management attention. This balancing act became particularly evident during the latest earnings call, where investor expectations were high that Intel would announce new external foundry customers. Instead, CEO Lip-Bu Tan revealed that two potential customers had merely evaluated the technical aspects of Intel’s upcoming 14A manufacturing process, without making any firm commitments. This left investors with the reminder that Intel’s foundry ambitions are still a work in progress rather than a proven growth engine.
Beyond data centers, Intel is facing renewed pressure in its largest segment: personal computers. A global memory supply shortage is projected to drive prices higher, potentially dampening demand for PCs just as Intel prepares to launch its “Panther Lake” chips. These processors are seen as a crucial opportunity for Intel to reclaim market share lost to AMD after years of competitive setbacks. If rising component costs hinder PC upgrades, Intel’s anticipated recovery in this segment could be postponed, further limiting its ability to offset volatility elsewhere in its business.
All these elements contribute to a broader reassessment of Intel’s turnaround under Tan, who has emphasized cost discipline and a more focused strategy. He has already scaled back some of the sweeping ambitions around contract manufacturing that raised concerns about cash burn under previous leadership. While this shift has been welcomed by some parts of the market, it also means Intel must demonstrate that a leaner approach can still facilitate growth and maintain strategic relevance. The sell-off on Friday indicates that investors are losing patience with a narrative built on faith rather than tangible results.
Looking ahead, investors will closely monitor whether supply constraints begin to ease, whether AI-driven demand translates into sustained revenue growth, and whether Intel’s manufacturing roadmap is drawing genuine external customers instead of tentative interest.
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