Intel stock plunges on weak guidance: What should investors do?

Core Viewpoint - Intel's disappointing forecast is primarily attributed to supply constraints rather than lower-than-expected demand, particularly from AI data centers for traditional CPUs [1][2]. Group 1: Supply Constraints and Production Outlook - Intel anticipates that supply constraints will be most pronounced in the first quarter of the year, with improvements expected as yields increase throughout the year [2]. - The company has faced challenges in ramping up production due to underestimating the demand for server upgrades, which has delayed the availability of new products until the end of Q1 [31][32]. - The CEO indicated that capital expenditures will not increase until significant customer contracts are secured, which may delay production ramp-up for new processes until 2028-2029 [8]. Group 2: Foundry Business and Customer Announcements - Intel's foundry business is a key focus for investors, with expectations for customer announcements related to their new processes, particularly 14A, by the end of this year or early next year [8][41]. - There is speculation that Apple may utilize Intel's upcoming processes, which could enhance Intel's position in the foundry market [5][6]. - The success of Intel's internal product, Panther Lake, has raised optimism about securing external customers for their foundry business [7][42]. Group 3: Financial Performance and Market Reaction - Intel reported earnings of 15 cents per share, exceeding expectations of 8 cents, marking an 88% beat, although guidance disappointed due to supply issues [14]. - The stock had seen a significant run-up of 46% leading up to the Q4 results, indicating high investor expectations that may have been misaligned with management's messaging [4][30]. - Analysts noted that rising memory prices and limited availability could negatively impact Intel's revenue, particularly in the PC and data center markets [10][45]. Group 4: Competitive Landscape and Market Position - Intel faces stiff competition in the foundry space, particularly from Taiwan Semiconductor, which holds a 60% market share [16]. - The company is positioned to become a domestic alternative to TSMC, with government and private investments signaling improved confidence in Intel's competitiveness [42]. - The memory chip shortage is expected to limit Intel's ability to capitalize on demand, particularly affecting the client side of their business [45].