Intel on course for worst day ever, triggers global chip rout

By Anhata Rooprai

Oct 30 (Reuters) - Intel sank 30% on Friday and was headed for its biggest one-day decline ever, deepening a selloff in tech stocks as weakening PC demand and the soaring costs of the AI boom rattled investors.

The major PC chip supplier on Thursday forecast quarterly revenue that was more than $1 billion below market estimates and said it does not expect positive cash flow this year, the latest sign of the far-reaching strains caused by the massive AI buildout.

Its warning also raised concerns over a broad swathe of the tech industry reliant on consumer device sales, from PC sellers such as Dell to PlayStation creator Sony and smartphone major Samsung, as AI-driven demand sends memory prices soaring.

Sentiment toward tech stocks was already fragile ahead of Intel's earnings after Meta and Alphabet's results showed the AI infrastructure race was turning once lightly indebted tech giants into heavy spenders reliant on borrowing.

Amazon exacerbated those concerns on Thursday by reporting a large cash outflow, while signaling higher capital expenditures next year atop an already huge amount in 2026.

"The market is in a sell first, ask questions later mood right now, and Intel's warning has given investors an easy excuse to take some money off the table across chip stocks," said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

HIGH-FLYING INTEL STUMBLES

Friday's plunge was set to wipe more than $146 billion off Intel's market value, with the US government - its largest shareholder after taking a 10% stake in August last year - facing a nearly $12 billion hit to the value of its holdings.

Concerns also spilled over to credit markets, with the cost of insuring Intel's debt against default surging to an all-time high. Five-year credit default swaps widened 17.5 basis points to 124.75 and were on track for the biggest one-day jump since October 2022, Markit data showed.

Still, multibillion-dollar investments from the US government and Nvidia have bolstered Intel's finances. The company had $21.84 billion in cash and cash equivalents at the end of September, against $46.32 billion in long-term debt.

Other US semiconductor stocks such as Advanced Micro Devices, Arm, Qualcomm, Nvidia, Broadcom and Micron fell between 4% and 12%.

Europe's ASML and Taiwan's TSMC fell more than 6% and nearly 2%, respectively, while China's tech-heavy STAR50 index hit a more than two-month low.

South Korea's AI-sensitive KOSPI slid 3.5%, and chip giant Samsung Electronics lost 3%, heading for its first monthly decline since July.

The rout also swept through US server makers, sending shares of Dell Technologies, Hewlett Packard Enterprise and Super Micro Computer down between 6% and 11%.

MEMORY CRUNCH BITES

Friday's slump follows a remarkable rally in Intel shares that had more than doubled their value this year, making the stock a Wall Street darling and building on gains of over 80% last year.

Surging demand for central processors that help power AI agent and chatbot responses has turned Intel into a winner of the boom after years on the sidelines, while its push to become a major contract chip manufacturer is also gaining momentum.

But the spending needed to build its manufacturing business is sapping its cash flows, and supply disruptions have capped its ability to tap growing demand for data-center chips.

Intel's PC chip business, which accounted for roughly half its third-quarter revenue, has also come under pressure from soaring memory prices as suppliers shift production towards high-bandwidth chips used in AI systems.

Seaport Research Partners analyst Jay Goldberg said Friday's selloff reflected "a loss of faith in management's credibility."

"Intel is producing too many chips for consumer PCs in the worst PC market in 15 years, while it is not making enough chips for AI servers in the biggest growth cycle ever for semis. Bad planning is the cause."

(Reporting by Anhata Rooprai in Bengaluru, additional reporting by Sudeshna Ghoshal and Niket Nishant in Bengaluru; Editing by Shinjini Ganguli and Aditya Soni)