Intel suffered as the chipmaker fell further behind in the AI race

Jan 26 (Reuters) - Intel ( INTC.O ) fell more than 12% on Friday after a gloomy first-quarter revenue outlook, as the chipmaker played catch-up in the AI race while dealing with a weak PC market.

While AI is driving a boom in the chip sector, Intel appears to be an exception, analysts said. Semiconductor makers that make data-heavy chips for generative AI were among the biggest winners in the stock market in 2023.

The forecast for Intel, one of the leading suppliers of PC chips, overshadowed the rest of the sector. The Philadelphia SE Semiconductor Index (.SOX), which opened a new tab, slipped 2.7% on its worst day in more than three weeks.

"AI seems to be everywhere except Intel," said Rosenblatt Securities analyst Hans Mosesmann, who has a sell rating on the stock.

He added that the lack of any perceived AI growth vector points the dial toward "another, yes another, transitional year."

Shares of other chipmakers Nvidia ( NVDA.O ), opens a new tab, Advanced Micro Devices ( AMD.O ), opens a new tab, Qualcomm ( QCOM.O ), opens a new tab, and Micron Technology ( MU.O ), Opening a new tab falls between 1.3% and 2.8%

Based on Friday's closing price of $43.65, Intel shed about $24.9 billion in market value. Its share increased to 90% in 2023. The chipmaker forecast current-quarter revenue that could be $2 billion lower than market estimates.

"Intel's risk of being left behind by chips from the likes of Nvidia and Advanced Micro Devices plays an increasingly important role in the data-hungry AI industry," said Russ Mold, investment director at AJ Bell.

Although Intel is not yet competitive in the AI-specific chip market, its central processing unit (CPU) is often used in conjunction with Nvidia's AI chips, with a third of Intel's server CPUs now sold as part of AI systems.

Some analysts commented positively on the stock, with at least 15 brokerages raising price targets. The average price across brokerages is $44, according to LSEG data.

"The company still stands to win from its AI bet in the long term. Margins look tight, which means CEO Pat Gelsinger's plan will still move forward, albeit at a slower pace," said Thomas Monteiro, senior analyst at Investing.com. Intel's stock trades at about 28 times its forward 12-month earnings estimate, 45.08 for AMD, and about 30 times for Nvidia, according to LSEG data.