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Google’s parent company Alphabet saw shares fall by almost 14 per cent on Thursday – but there’s an even bigger drop in store for another tech giant, with Intel facing a full quarter of the company value being wiped off overnight.
Intel, which makes the processors in PCs as well as semiconductor chips, will see a devastating 25 per cent drop in share price when US stock markets open later on Friday, equivalent to a drop in company market capitalisation valuation of $121.7bn (£90.6bn).
Behind the struggles is a clash of circumstances including higher costs on memory chips, slowing demand on PC sales and a wider shortage in supply lines, which has further impacted sales.
On Thursday night after markets closed, Intel reported that it would miss earnings forecasts for the final quarter of the year by as much as $3bn, compared to some earlier estimations, while adjusted profit per share will be around 40 per cent lower than anticipated.
The company’s CEO, Lip-Bu Tan, predicted 2027 would be “a very severe issue to all of us” as a result of rising memory component costs. “We are not alone — it’s just the whole market is impacted,” he added.
Intel’s fall continues a hit to the wider tech sector in the stock market, after Google saw the biggest drop to to its share price in history on the back of increased spending on artificial intelligence, lower income from search and investors showing concern that future anticipated AI-related profits may not materialise.
That makes it different to Intel’s price caving in, but underlines the rampant caution around investors across the span of technology firms, with the Nasdaq 100, an index comprised of the biggest US tech companies, dropping by 1.4 per cent on Thursday and set to open 2.4 per cent lower on Friday.
“Intel’s share price drop is enormous, after a dismal earnings report,” said Kathleen Brooks, research director at trading platform XTB.
“The company reported weaker than expected sales forecasts as PC chip sales slow. Gross margins were also lower than expected due to the high price of memory chips, which is eating into Intel’s bottom line.
“These numbers break a string of stronger results for Intel in recent quarters, and suggest that cost inflation, most notably in memory chips, is starting to impact the performance of other parts of the AI industry.
“Overall, it is unlikely that the AI trade will recover on Friday, and instead the focus is shifting to the non-tech sectors of the market and safe havens as we reach the end of October trading.”
