Intel Fails to Meet AI Server Chip Demand, Forecasts Lower Q1 Revenue

Intel said on January 22 it struggled to meet demand for server chips used in AI data centres and forecast quarterly revenue and profit below market estimates. This sent its shares down 13% in after-hours trading.

The forecast highlights Intel’s difficulty predicting global chip demand, as current products reflect decisions made years ago. The company recently launched a long-awaited laptop chip aimed at regaining its PC lead, even as a memory chip shortage is expected to hit sales in that market.

Intel executives said demand for server central processors used alongside AI chips surged unexpectedly. Even with factories running at full capacity, Intel cannot keep up, leaving potential data centre sales unrealised while its new PC chip squeezes profit 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.

Intel forecast first-quarter revenue of $11.7 bn to $12.7 bn, below analysts’ average estimate of $12.51 bn, according to LSEG data. The company also expects adjusted earnings per share to break even in the first quarter, compared with forecasts of 5 cents per share.

Investors had hoped rapid data centre buildouts by tech companies would drive sales of Intel’s server chips, which are used alongside Nvidia’s dominant GPUs.

Finance chief David Zinsner said cloud companies were surprised by the surge in AI demand and rushed to upgrade ageing chip fleets due to «erosion in networking performance.»

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

He added that even though Intel owns its own factories, it faces delays when shifting production to different chip types, and the company did not plan its factory output for the sudden rise in data centre demand.

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