Intel CEO is confident in its AI future after posting soft guidance

After a few steps forward for investors, it's a few steps back for Intel (INTC).

Shares of the chipmaker fell 8% on Friday after several hiccups in first-quarter results and second-quarter guidance. While the company's first-quarter earnings beat expectations by $0.05, expectations for the rest of the year fell below consensus.

“A lot of great things are happening in the second half of the year. We feel very comfortable with the prospects that we have,” Intel CEO Pat Gelsinger told Yahoo Finance.

The selling pressure on Intel stock comes from two areas.

First, results for the quarter were limited by a waffle supply issue that Wall Street was unable to properly identify.

And second, there has been some weakness in customer demand, causing Intel executives to be cautious in their second-quarter expectations.

Intel expects second-quarter revenue between $12.5 billion and $13.5 billion. Analysts expected $13.63 billion. Earnings are estimated at $0.10 per share, lower than analyst expectations of $0.24.

“We believe Intel has a difficult road ahead as the company embarks on a multi-year transition phase that entails high capital intensity and an ambitious design roadmap, with expectations of moving through five process node transitions in four years,” said Stifel analyst Ruben Roy in a customer comment.

Roy maintained a Hold rating on Intel stock.

The company's lukewarm guidance overshadowed a number of wins in the quarter and in the past two months.

Gelsinger noted that Intel expects more than 40 million shipments of AI PCs in 2024, a slight improvement from its previous expectations. All of the company's planned chip launches for this year remain on schedule, Gelsinger added.

Intel recently presented a range of AI-focused products and services. Shown was Gaudi 3, an AI chip for generative AI software that will be available later this year.

The company also unveiled its Core Ultra processor, which will target the aforementioned emerging AI PC market.

Intel CEO Pat Gelsinger holds the Intel CEO Pat Gelsinger holds the

Intel CEO Pat Gelsinger, holding the “Gaudi 3” AI chip, speaks during the 54th annual meeting of the Semafor 2024 World Economy Summit in Washington, DC, on April 17, 2024. (Photo by MANDEL NGAN/AFP via Getty Images) (MANDEL NGAN via Getty Images)

And just last month, Intel received $8.5 billion in grants and another $11 billion in loans from the Biden administration to build semiconductor factories in four states. The expansions are part of Intel's goal to become a leading maker of chips for other companies, competing with No. 1 player Taiwan Semiconductors (TSMC).

JPMorgan analyst Harlan Sur said: “While we are still impressed with the current execution, the next twelve months will be the most difficult for the team as they will launch two data center products and two major customer products through three new manufacturing technology nodes. But we believe it will be a strong indicator of the team's performance over the next three to five years.”

Intel's earnings and tepid outlook are below consensus as the threat of higher, longer-term interest rates weighs on once-popular tech stocks like Nvidia (NVDA). Building out an AI infrastructure can also be more expensive than expected, as evidenced by first-quarter earnings from Meta (META), Alphabet (GOOG, GOOGL), and Microsoft (MSFT).

So what's next in tech stocks? Yahoo Finance delved into the latest episode of the 'Starting bidpodcast (below).

Brian Sozzi is editor-in-chief of Yahoo Finance. He is also the host of the 'Starting bid'podcast. Follow Sozzi on Twitter/X @BrianSozzi and further LinkedIn. Tips about deals, mergers, activist situations or something else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to join Yahoo Finance Live? Email Brian Sozzi.

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