Intel Struggles with High Chip Demand, Sending Shares Sliding
By Reuters | 22 Jan, 2026

CEO Lip-Bu Tan's turnaround strategy produced a 40% share value jump but now faces backlash as new chip manufacturing processes are slow to improve yield of usable chips despite high demand for its server and PC chips.

 Intel said on Thursday it struggled to satisfy demand for its server chips used in AI data centers, and forecast quarterly revenue and profit below market estimates, sending shares down 13% in after-hours trading.

The forecast underscores the difficulties faced by Intel in predicting global chip markets, where the company's current products are the result of decisions made years ago. The company, whose shares have risen 40% in the past month, recently launched a long-awaited laptop chip designed to reclaim its lead in personal computers just as a memory chip crunch is expected to depress sales across that industry.

Meanwhile, Intel executives said the company was caught off guard by surging demand for server central processors that accompany AI chips. Despite running its factories at capacity, Intel cannot keep up with demand for the chips, leaving profitable data center sales on the table while the new PC chip squeezes its margins. 

"In the short term, I'm disappointed that we are not able to fully meet the demand in our markets," Chief Executive Officer Lip-Bu Tan told analysts on a conference call.

The company forecast current-quarter revenue between $11.7 billion and $12.7 billion, compared with analysts' average estimate of $12.51 billion, according to data compiled by LSEG. 

It expects adjusted earnings per share to break even in the first quarter, compared with expectations of adjusted earnings of 5 cents per share.

Investors and analysts have hoped that rapid data center buildouts commissioned by large tech companies to advance their AI businesses will drive sales for Intel's traditional server chips that are used alongside Nvidia's market-leading graphics processing units (GPU).

Demand for AI surprised some of the cloud-computing giants, which have had to scramble in order to upgrade aging fleets of chips because of an "erosion in networking performance," finance chief David Zinsner told Reuters in an interview.

"They were all a little bit caught off guard," Zinsner said.

During the conference call with investors, Zinsner said that despite owning its own factories, Intel faces a lag time in changing the types of chips it makes and that the company was not managing its factories with the expectation that data-center demand would change.

TWO CUSTOMERS ENGAGED ON CONTRACT MANUFACTURING

After years of missteps left Intel struggling in the fast-growing AI chip market and drained its finances, Tan has engineered a turnaround strategy centered on cutting costs and eliminating management layers, while championing a fresh product road map. 

Intel has held off on investing heavily in its next-generation manufacturing process known as 14A, while waiting for a large customer, Zinsner said. Like its rivals in the foundry business, Intel is tight-lipped about its customers, but Zinsner said investors will be able to tell when it wins a customer by looking for a spike in capital spending.

Tan said on the conference call that two customers were evaluating the technical details of the 14A technology, a possible step toward creating test chips with it. Intel executives said they expect to know by the second half of this year whether external customers want to use the technology.

Zinsner said the company also believes that its capital expenditure could stay steady, versus previous expectations that it would decline.

With a slew of high-profile investments in Intel last year - a $5  billion investment from Nvidia, $2  billion from SoftBank and a U.S. government stake in the company - investors' confidence in the company's revival has been high.

"For investors, the key insight is that Intel's turnaround story remains supply-constrained rather than demand-constrained; a frustrating position that delays the financial recovery despite competitive products and strong customer interest," Running Point Capital's chief investment officer, Michael Schulman, said.

Tan has also significantly pared back contract manufacturing ambitions promoted by his predecessor,  Pat Gelsinger, in an effort to shore up Intel's balance sheet after capital-intensive expansions pummeled margins. 

After a more than 60% drop in its share price in 2024, Intel's stock gained 84% in 2025, far outperforming the benchmark semiconductor index's 42% rise.

The company has started shipping its new "Panther Lake" PC chips - the first product made using Intel's make-or-break 18A manufacturing technology, and analysts expected the production ramp-up to hurt margins. 

Reuters has reported that only a small percentage of the chips printed via 18A have been good enough to make available to customers. Intel has said its yields, or the number of good chips per silicon wafer, are improving monthly. Weak yields also routinely pressure margins. 

During the conference call, Tan said that 18A yields are in line with Intel's internal plans but are "still below what I want them to be." 

A global shortage of memory chips has boosted the prices of those chips and made personal computers - a key market for Intel - more expensive. Zinsner said in a statement that he expects available supply to be at its lowest levels in the first quarter, and improve in the second quarter.

Intel has also been consistently losing share in the PC market to rival AMD and chip blueprint designer Arm Holdings.

(Reporting by Arsheeya Bajwa in Bengaluru and Max A. Cherney in San Francisco; Additional reporting by Stephen Nellis and Noel Randewich in San Francisco; Editing by Sayantani Ghosh and Matthew Lewis)