Intel has acknowledged that it is unable to keep pace with rising demand for its server chips used in artificial intelligence data centres, a shortfall that has weighed heavily on investor confidence. The company’s weaker-than-expected revenue and profit forecast triggered a sharp 13 percent drop in its shares during after-hours trading.
The outlook highlights the challenges Intel faces in navigating the rapidly evolving global chip market. Many of the company’s current products are the result of strategic decisions made years ago, leaving limited flexibility as demand patterns shift. Although Intel shares have gained nearly 40 percent over the past month, the latest forecast has raised fresh concerns among investors.
Intel executives revealed that demand for server central processing units, which operate alongside AI-focused graphics processors, has surged faster than anticipated. Despite running its manufacturing facilities at full capacity, the company has been unable to produce enough chips to meet demand, resulting in missed opportunities in the high-margin data centre segment.
Chief Executive Officer Lip-Bu Tan expressed disappointment during a conference call with analysts, noting that Intel was unable to fully satisfy market demand in the near term. He acknowledged that this gap is affecting the company’s performance at a time when the AI sector is expanding rapidly.
For the current quarter, Intel forecast revenue between $11.7 billion and $12.7 billion, falling short of analysts’ expectations of $12.51 billion. The company also said it expects adjusted earnings per share to break even, compared with market forecasts of a modest profit.
At the same time, Intel recently launched a long-awaited laptop chip aimed at regaining leadership in the personal computer market. However, that product is expected to pressure profit margins just as a memory chip shortage threatens to slow PC sales across the industry.
Investors had hoped that large-scale data centre expansion by major technology companies would boost sales of Intel’s traditional server chips, which are typically used alongside Nvidia’s market-dominant AI processors. Instead, Intel executives said the pace of AI-driven demand caught several cloud-computing giants off guard.
Chief Financial Officer David Zinsner explained that many cloud providers were forced to upgrade aging chip fleets due to declining network performance. He added that even with its own factories, Intel faces delays in shifting production to different chip types, as manufacturing plans were not aligned with sudden changes in data centre demand.
The situation underscores the difficulties chipmakers face in predicting long-term technology trends. As AI continues to reshape the semiconductor industry, Intel’s ability to adapt its manufacturing strategy will be critical to maintaining competitiveness in the data centre market.
