Business1 min read

Intel stock falls most since 1974 as Israel plant shutdown hits; US stake loses $12B

By · Via Times of India · Published by Everything Blog

In short

The chipmaker's production challenges worsened after an industrial explosion killed two workers, prompting an extended shutdown that management expects will cause hundreds of millions in lost revenue across two quarters. Compounding the facility disruption, global PC demand continues to drop due to elevated component costs, forcing Intel to forecast weak demand through mid-next year. For the current quarter, revenue projections of $15 billion to $16 billion substantially missed Wall Street estimates. The downturn also prompted DA Davidson to downgrade the stock to neutral from buy amid valuation concerns.

Key points

  • The sharp equity decline wiped out roughly $12 billion from the U.S. government's 10% hol…: The sharp equity decline wiped out roughly $12 billion from the U.S. government's 10% holding and reduced Nvidia's stake by about $6 billion.
  • Quarterly revenue guidance between $15 billion and $16 billion fell well short of consens…: Quarterly revenue guidance between $15 billion and $16 billion fell well short of consensus expectations pegged at $17.1 billion.
  • Intel currently lacks external clients for high-volume 18A manufacturing in Arizona, but…: Intel currently lacks external clients for high-volume 18A manufacturing in Arizona, but leadership expects customer announcements within two quarters.

Sources checked by our analysis pipeline: 1

Intel shares fell 28.58% on Friday to $65.76. The decline followed a weaker-than-expected forecast that reflected an extended shutdown at a chip plant in Israel and continued weakness in the personal computer market. According to CNBC, the stock was headed for its worst day since 1974 and its second-steepest decline on record.

The sell-off erased about $12 billion from the value of the US government’s stake, although the investment remained profitable, the report said. It also marked a setback for chief executive Lip-Bu Tan’s turnaround effort after Intel shares had gained about 150% this year before the company’s latest earnings report. The company expects the Israel disruption alone to cost approximately $600 million in revenue over two quarters.

Israel plant explosion disrupts chip shipments

Intel’s forecast accounts for an explosion at an Israeli fabrication plant that killed two workers and seriously injured a third earlier in October. Tan described the incident as an “unfortunate and tragic accident” and said it caused an “extended shutdown” affecting shipments of 10-nanometre chips.

Intel’s finance chief, David Zinsner, said the lost revenue would total…

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