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
08-02-24 0707ET
