Intel (NASDAQ: INTC) shares collapsed after the chipmaker issued weak Q4 guidance amid a slowdown in the PC market. Before its earnings report, the stock had been on a huge run, up about 150% year-to-date, benefiting from the rise of agentic artificial intelligence (AI) and the sudden surge in demand for server central processing units (CPUs).
However, even with the stock getting crushed, I still wouldn’t buy it. The semiconductor stock got way too far ahead of itself for a company that has been losing market share in the data center CPU market and losing money in its struggling foundry business. At the same time, the stock went from cheap relative to its physical assets (tangible book value) to one that looked overvalued.
Missed AI’s “Act 1”? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
Let’s take a closer look at Intel’s Q3 report and prospects and why I still don’t think the stock is a buy even after this pullback.
PC slowdown hits the stock
Intel’s Q3 results were quite solid, with revenue up 21% to $16.5 billion. However, that was a deceleration from Q2’s 25% growth and was just in line with analyst estimates, as compiled by LSEG.
Intel’s biggest growth driver was once again server CPUs, with the company seeing its strongest data center growth in 15 years. With the rise of AI agents, server CPUs have been in high demand, while supply has been tight. In fact, Intel called it one of the largest supply shortages the industry has seen
This led to Intel’s data center and AI (DCAI) revenue surging 78% to $7.3 billion in the quarter. Meanwhile, DCAI operating income more than tripled from $964 million to $3 billion.
The growth was led by newer-generation CPUs, with the company saying that since Q1, its 18A client CPUs have gone from less than 5% of revenue to nearly a third. Meanwhile, 18A costs have fallen by 40% as it’s seen continued improvements in yield and cycle time.
Intel expects the strong demand for server CPUs to continue. It sees server CPU industry unit growth of 30% in both this year and next, noting it would be higher in both years if not for supply constraints. Meanwhile, it sees CPU industry revenue climbing fivefold over the next five years from $40 billion to $200 billion.
While its data center segment was strong, Intel’s larger client computing and physical AI group (CCPG) struggled, with Q3 revenue falling 5% to $8.1 billion. Segment operating income, meanwhile, declined by 15% to $2.3 billion.
