Intel’s stock plunged over 12% on January 26th, 2023, following a disappointing first-quarter revenue outlook that suggests the chipmaking giant is struggling to keep pace with rivals in the red-hot AI chip sector.

While artificial intelligence is fueling explosive growth in semiconductor demand, Intel appears to be missing out on the AI chip bonanza. 

Nvidia, AMD, Qualcomm, and other chipmakers developing advanced AI accelerators and GPUs were among the top-performing stocks in 2023. 

However, Intel, a leading PC and server CPU supplier, offered bleak guidance that could miss estimates by over $2 billion.

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• Intel stock plunges 12% as weak guidance suggests it falls behind rivals in the red-hot AI chip market.

• Nvidia, AMD, and Qualcomm lead on dedicated AI accelerators, while Intel plays catch-up.

• Despite the CEO’s turnaround plan, Intel faces a transitional 2023 amid soft PC demand and a lack of competitive AI silicon.

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Intel Plays Catch-Up in Booming AI Chip Market

“AI seems like it’s everywhere except at Intel,” commented analyst Hans Mosesmann of Rosenblatt Securities, which has a ‘sell’ rating on Intel stock. 

The lack of an AI growth catalyst indicates “another transitional year” for the company.

Intel’s Poor AI Chip Performance Weighs on Broader Semiconductor Sector

Intel’s weak outlook dragged down other semiconductor stocks, with the Philadelphia Semiconductor Index falling 2.7% for its worst day in weeks. 

While not yet competitive in standalone AI chips, Intel’s CPUs are commonly used with Nvidia’s AI accelerators, comprising 1/3 of Intel’s data center CPU sales.

Rivals Take Lead in AI Chip Race

With AI workloads requiring orders of magnitude more compute power, Intel is playing catch-up to rivals like Nvidia, AMD, and Qualcomm, which engineered their GPUs and AI accelerators specifically for deep learning tasks.

Nvidia’s data center revenue grew 11% in its most recent quarter, while Intel’s data center group sales declined 33%. 

AMD and Qualcomm also posted strong AI chip sales growth in 2022. 

Intel is now on the back foot, trying to optimize its existing CPU architectures for AI instead of building new dedicated AI silicon chips.

Intel’s Stock Valuation Remains High Despite Transition Year

Some analysts maintain Intel still has the long-term potential to capitalize on AI computing. 

However, the company faces a transitional 2023 amid soft PC demand and lost ground in the AI chip race. 

With 28x forward earnings, Intel retains a rich valuation compared to AMD and Nvidia’s ratios below 30x.

While Intel works to catch up in AI accelerators, its leading CPU franchise remains under pressure. 

Intel CEO Pat Gelsinger’s turnaround plan stays intact but will likely unfold more subduedly. 

With revenue poised to slow and rivals stretching their lead in AI semiconductors, Intel faces a challenging journey to recapture its former dominance in advanced computing.

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