Chip Stocks Slump After Intel Job Cuts, Sales Performance Weigh on Sector -- Update

Dow Jones08-02
 

By Mauro Orru

 

Chip makers' shares plunged Friday after Intel said it would slash thousands of jobs and halt dividend payments following a quarterly loss as it jockeys for position in a market increasingly dominated by demand for artificial-intelligence chips.

Intel said it would lay off more than 15,000 employees, most of them by the end of this year, as part of a $10 billion cost-saving drive. Chief Executive Pat Gelsinger said the chip maker had to adjust to market conditions, particularly a surge in demand for AI chips that is much more acute than he had expected. Intel's stock fell more than 20% in premarket exchanges Friday.

AI chips have turbocharged the sales and valuation of rival Nvidia, but the stock is down 3.5% premarket, a sign that even Nvidia isn't immune to wider market sentiment.

While Nvidia seized the AI opportunity from the get-go, Intel has struggled to gain a foothold in the market for AI chips. Chief Financial Officer David Zinsner said that gross margin headwinds from the acceleration of Intel's AI PC development had weighed on second-quarter results.

For the current quarter, Intel is forecasting sales of $12.5 billion to $13.5 billion. Jefferies analysts wrote in a note to clients that this guidance is about 10% below consensus.

In Europe, shares of Dutch semiconductor-equipment maker ASML Holding lost more than 8% in afternoon trading, while smaller peer ASM International fell nearly 11%. Elsewhere in the continent, shares of Infineon Technologies and Apple supplier STMicroelectronics dropped about 4%.

Meanwhile in Asia, shares of Taiwan Semiconductor Manufacturing Co., the world's largest contract chip maker, closed down nearly 6% in Taipei. Shares of SoftBank Group, the parent of British chip designer Arm Holdings, closed 8% lower in Tokyo, while chip-making equipment maker Tokyo Electron shed 12%.

 

Write to Mauro Orru at mauro.orru@wsj.com

 

(END) Dow Jones Newswires

August 02, 2024 06:52 ET (10:52 GMT)

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