Server Stocks Fall 6% to 11% as Intel Drops 30.9%
Key Facts
Shares of Dell Technologies, Hewlett Packard Enterprise and Super Micro Computer fell between 6% and 11% in trading on October 30, as a selloff led by Intel spread to server makers. Intel shares fell 30.9% during the session, approaching the worst day in the company’s history, which dates back to 1972, according to the Associated Press. At 2:15 p.m. Eastern time, the Nasdaq Composite was down 3.4% and the S&P 500 fell 2.2%. The moves followed the company’s warning of near-term challenges, including manufacturing supply shortages, a memory crunch and weak demand for personal computers. “We face near-term challenges, including manufacturing supply shortages, an unprecedented memory crunch and the resulting weakness in demand for personal computers,” CEO Lip-Bu Tan said.
The pressure was reflected in the outlook for the personal-computer chip business, which accounted for about half of Intel’s revenue in the third quarter. The company expects revenue from the business to decline in the mid-20% range in the fourth quarter, after falling 5% to $8.10 billion in the third quarter. It linked demand pressure to higher memory prices, as suppliers shift production toward high-bandwidth chips used in artificial-intelligence systems. This is raising the cost of computers at a time when demand in the market is weak. Intel said weak PC demand could continue through the first half of 2027, with memory prices continuing to drive higher device costs.
The weak fourth-quarter outlook followed a third quarter in which Intel posted growth in revenue and adjusted earnings. Revenue rose 21% to $16.51 billion in the quarter ended September 26, in line with market estimates, while adjusted earnings were 52 cents a share, above estimates of 40 cents. The results present a different picture from the near-term outlook, as third-quarter growth coincides with a warning of declining PC chip sales and tight manufacturing supplies. The company also said demand for central processing units remains strong, while production constraints limit its ability to meet the needs of the PC and server markets. Reuters noted that Intel shares had more than doubled during the year before falling on October 30.
Server chip supplies faced additional pressure after an explosion at an Intel factory in Israel in October. The company said the incident would reduce revenue by about $600 million over two quarters and cut supplies of AI server chips to cloud computing customers. Chief Financial Officer David Zinsner said Intel cut its fourth-quarter revenue guidance by about $300 million and lowered its gross margin forecast by about 200 basis points because of the explosion. Zinsner expected a similar impact in the first quarter, extending the factory disruption into early 2027. Shares of other U.S. semiconductor companies, including AMD, Arm, Qualcomm, Nvidia, Broadcom and Micron, also fell between 4% and 12% on October 30.
The weak outlook came alongside significant funding needs to expand manufacturing. Zinsner said Intel does not expect positive cash flow this year and that capital spending will reach $20 billion in 2026, rising sharply in 2027. The plan is tied to the company’s efforts to expand production capacity and secure additional manufacturing equipment as it faces supply shortages. An analyst at Seaport Research Partners said the selloff reflected “a loss of confidence in management’s credibility.” With processor demand holding up, the PC market under pressure and the factory disrupted, Intel faces the challenge of expanding and financing production as expected PC chip revenue declines in the fourth quarter.