Intel Forecasts Weak Q1 as AI Server Chip Demand Outpaces Supply

Intel forecast first-quarter revenue between $11.7 billion and $12.7 billion, below market expectations, and said it is struggling to meet demand for server processors used in AI data centers, reports Reuters. Shares of the company fell 13% in after-hours trading following the announcement.

Chief Executive Officer Lip-Bu Tan told analysts that Intel's factories are running at capacity but cannot keep pace with orders for data center chips, limiting potential sales. The company expects adjusted earnings per share to be roughly break-even for the quarter, compared with analyst estimates of five cents.

Intel said it was caught off guard by the rapid surge in AI-related demand, with finance chief David Zinsner noting that large cloud providers were also unprepared for the increase. Despite owning its own manufacturing facilities, Intel faces delays in shifting production to meet changing market needs.

Tan added that two external customers are currently assessing Intel’s 14A manufacturing technology, with decisions expected later this year. Meanwhile, yields for its new 18A process remain below desired levels, contributing to margin pressure even as shipments of its new "Panther Lake" PC chips begin.