Shares of Intel plunged 14% on Friday after the chipmaker failed to keep pace with surging artificial intelligence–driven demand for data-center processors due to ongoing supply constraints. The shortfall disappointed investors who had been betting on a sustained turnaround.
After largely missing the early stages of the AI boom that propelled Nvidia to become the world’s most valuable company, Intel has recently seen a sharp increase in demand for its traditional server chips. These processors are widely used alongside advanced graphics chips inside data centers.
That renewed interest, combined with high-profile backing from the U.S. government, SoftBank, and Nvidia, had helped reignite enthusiasm around the stock. Intel outperformed much of the semiconductor sector last year with an 84% gain and has continued its rally into 2026, rising roughly 47% so far in January.
However, analysts at TD Cowen cautioned that the rally had been driven more by optimism than near-term fundamentals, describing it as fueled largely by expectations rather than operational reality.
Intel is currently running its manufacturing facilities at full capacity but still cannot satisfy demand. Chief Financial Officer David Zinsner said supply availability is expected to improve in the second quarter, after bottoming out in the first three months of the year.
Analysts at Jefferies echoed that view, suggesting the supply crunch could reach its low point in March, while Oppenheimer expects constraints to ease by the second quarter.
Friday’s sharp selloff followed quarterly profit and revenue guidance that fell short of market expectations. If losses hold, Intel’s market capitalization is set to shrink by more than $35 billion.
Bernstein analysts said the server demand cycle appears genuine but warned that Intel was caught off guard by the scale of demand, leaving its manufacturing capacity poorly positioned to respond quickly.
The company is also grappling with delays in shifting its production mix toward the types of semiconductors most needed by data centers, limiting its ability to ramp up output of high-demand processors.
Adding further pressure to Intel’s outlook is a global memory chip shortage, which is expected to push prices higher and weaken demand in the personal computer market. PCs remain Intel’s largest business segment, where its upcoming “Panther Lake” chips were expected to help reverse years of market-share losses to AMD.
Investors are closely watching Intel’s restructuring under Chief Executive Lip-Bu Tan, who has prioritized cost reductions and scaled back the company’s ambitions in contract chip manufacturing.
Speculation around new external customers had played a major role in driving the stock higher ahead of earnings. However, Tan said during the post-results call that two potential clients had so far only evaluated the technical aspects of Intel’s upcoming 14A manufacturing process, stopping short of firm commitments.
