Intel was set to erase nearly $10bn (€9.2bn) in market value after the US chipmaker which employs 5,000 people in Ireland stumped Wall Street with dismal earnings projections, fanning fears around a slump in the personal computer market.
The company predicted a surprise loss for the first quarter and its revenue forecast was $3bn below estimates as it also struggled with slowing growth in the data center business. Intel shares fell, while rival Advanced Micro Devices and Nvidia recovered from steep premarket losses. Intel supplier KLA fell after its dismal forecast.
"No words can portray or explain the historic collapse of Intel," said Rosenblatt Securities' Hans Mosesmann, who was among the 21 analysts who cut their price targets on the stock.
The poor outlook underscored the challenges facing chief executive Pat Gelsinger as he tries to re-establish Intel's dominance of the sector by expanding contract manufacturing and building new factories in the US and Europe.
The company has been steadily losing market share to rivals like AMD, which has used contract chipmakers such as Taiwan-based TSMC to make chips that outpace Intel's technology.
"AMD's Genoa and Bergamo (data centre) chips have a strong price-performance advantage compared to Intel's Sapphire Rapids processors, which should drive further AMD share gains," said Matt Wegner, analyst at YipitData.
Analysts said that puts Intel at a disadvantage even when the data centre market bottoms out, expected in the second half of 2022, as the company would have lost even more share by then.
"It is now clear why Intel needs to cut so much cost as the company's original plans prove to be fantasy," brokerage Bernstein said. "The magnitude of the deterioration is stunning, and brings potential concern to the company's cash position over time."
Intel still dominates the markets for PC and server processing chips, with a market share greater than 70%, but that is down from more than 90% in 2017. Intel, which plans to cut $3bn in costs this year, generated $7.7bn in cash from operations in the fourth quarter and paid dividends of $1.5bn.
With capital expenditure estimated to be around $20bn in 2023, analysts said the company should consider cutting its dividend. Intel has insisted it will regain its footing against AMD and other chip rivals which are gobbling up market share, but Wall Street is sceptical.
"We lost share, we lost momentum. We think that stabilises this year," Mr Gelsinger told investors on a conference call. However, business tech spending is falling sharply as customers are wary of a recession, and consumer electronics demand has slumped. That's a headwind for both Intel and AMD.